State Governments Draw N26.31 Billion Loans from Excess Crude Account as Balances Plummet

State governments across Nigeria have drawn approximately N26.31 billion in loans from the Excess Crude Account, initially designed to fund development and infrastructure projects.

A comprehensive study of financial statements from three major banks, Guaranty Trust Holding Company, Access Bank, and Zenith Bank Group, revealed a sharp decline in the account balances, totaling N183.1 billion as of June 30, 2023.

This staggering decrease is a noticeable shift from the N209.41 billion balance recorded on the same date in 2022.

These loans, secured against the state governments’ Excess Crude Account balances, bear an annual interest rate of 2%, payable to the Central Bank of Nigeria with a 20-year tenure and monthly installments.

Notably, the interest rates were temporarily reduced to 1% and 5% due to CBN’s COVID-19 forbearance measures.

Guaranty Trust Holding Company had a significant N14.05 billion in the loan facility in H1 2022, which dropped to N12.53 billion by H1 2023. Access Bank’s balance fell from N111.43 billion to N99.04 billion and Zenith Bank’s dropped from N83.93 billion to N71.53 billion, marking the highest withdrawal among the three banks.

Meanwhile, the nation’s Excess Crude Account balance shrank by 98.67% from $35.377 million on June 24, 2022, to $473,754.57 by June 2023.

The Federal Government’s prior utilization of these funds for offshore patrol vessels and armored vehicle refurbishments underscores the pressing need for transparency and judicious management of state funds.

The revelations shed light on the state governments’ increasing reliance on loans to address their financial needs and the consequences of CBN’s policy responses to national emergencies like the COVID-19 pandemic.