State governments have reportedly borrowed N46.17 billion from three banks, namely Access Bank, Fidelity Bank, and Zenith Bank Group, to cover salary payments from January to June 2023. The information was obtained through an analysis of the financial statements of these banks for the first half of 2023. Access Bank took the lead in loans, with N42.97 billion borrowed, followed by Zenith Bank (N1.78 billion) and Fidelity Bank (N1.42 billion) within the six-month period. In total, they borrowed about N46.17 billion from the three banks to pay salaries during this period.

This development follows a slight increase in revenue allocation to states. An analysis of communiqués issued by the Federation Account Allocation Committee (FAAC) between January and July 2022 and 2023 indicated a N540 billion increase in the amount shared among the Federal Government, states, and Local Government Areas. However, it was observed that about 25 states in Nigeria faced a drop in their internally generated revenue (IGR) and grappled with a cash crunch in the first quarter of 2023. These states projected an IGR of N219.56 billion for Q1 2023 but only generated about N182.26 billion, resulting in a revenue performance of 83.01%, signifying underperformance in the quarter.

According to the H1 2023 financial statement of Access Bank, the outstanding balance on the salary bailout fund decreased from N101.81 billion in December 2022 to N58.84 billion by June 30, 2023. Access Bank stated that this amount represents the outstanding balance on the state salary bailout facilities granted by the Central Bank of Nigeria for onward disbursements to state governments to pay the salaries of workers. The facility has a 20-year tenor with a 2% interest payable to the CBN. The bank is obligated to on-lend to the states at an all-in interest rate of nine percent per annum.

Similarly, Fidelity Bank's H1 2023 financial statement revealed that the outstanding balance on the salary bailout fund decreased from N82.07 billion in December 2022 to N80.65 billion by June 30, 2023. The bank clarified that this represents funds from the CBN Bailout Fund, routed through the bank for on-lending to states facing challenges in meeting domestic obligations, including salary payments. The bailout fund has a 20-year tenor at 9% per annum.

Zenith Bank's H1 2023 financial statement indicated an outstanding balance of N125.14 billion on the salary bailout fund by June 30, 2023, compared to N126.92 billion in December 2022. The bank stated that the Salary Bailout Scheme, approved by the Federal Government, assists state governments in settling outstanding salaries. Funds are disbursed at 2% to banks nominated by beneficiary states for on-lending at 9% over a 20-year tenor. Repayments are deducted at source by the Accountant General of the Federation, serving as a first-line charge against each beneficiary state's monthly statutory allocation. Notably, this facility is not secured.