The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed disclosed this during a news conference on the fiscal stimulus measures in response to the COVID-19 pandemic and oil prices fiscal shock in Abuja on Monday.
Ahmed said that the fund was also to address these emerging fiscal risks that the pandemic had caused.
She noted that the Stabilization Fund was created for such emergencies and was to be utilised for this purpose while the government was also exploring other options to augment FAAC disbursements over the course of the 2020 fiscal year.
She explained that based on the fiscal assumptions underpinning the 2020 Appropriation Act, monthly Federation Account Allocation Committee (FAAC) disbursements to the Federal and State Governments were projected at N888.5 billion.
She said however, due to the significant drop in international oil prices, FAAC monthly disbursements had declined in recent months to N716.3 billion in January and N647.4 billion in February 2020.
According to her, their experience shows that monthly average FAAC receipts must average at least N650 billion for the Federal and State Governments to meet their current obligations. Unfortunately, they project that monthly receipts may decline to below N400 billion, over the next three to six months.
“Mr President has also approved that the Federal Ministry of Finance, Budget and National Planning should engage with the CBN to agree on a Debt and Interest Moratorium for States on Federal Government and CBN-funded loans, in order to create fiscal space for the States, given the projected shortfalls in FAAC allocations.
“Accordingly, once monthly average FAAC receipts fall below a specific threshold, interest and capital payments by States shall be suspended till monthly average FAAC receipts exceed the threshold.
“The details of this Moratorium will be expeditiously worked out with a view to submitting the final proposals for Mr. President’s guidance and final approvals.
“This intervention is vital to create fiscal space for the States, as they deal with the health and economic impact of the crisis. States will also be encouraged to explore similar arrangements for their outstanding debts to Commercial Banks,”she explained.