By Mumini AbdulKareem and Mike Adeyemi
Kwara State Governor, Abdulrahman Abdulrazaq has come under heavy criticisms over plans to approach the capital market to assess a bond of N35 billion for projects in the state.
The request for the approval of the move which has since been okayed by the Kwara State House of Assembly has attracted serious denunciation from Kwarans across the political divides and financial experts in the state who have rejected the move.
Former Minister of Sports and Youth Development, Bolaji Abdullahi faulted the government for not tapping into the abundance potentials of intellectual who can think the state out of the present financial problem.
“The governor really needs to change his economic advisers. To increase the state’s debt profile by 55% in one fell swoop based on uncertain revenues is poor thinking; almost close to no thinking at all. The state has enough brilliant people that can help the government think through its revenue challenge. The governor should please look for them”, Bolaji who is also a development expert noted.
According to him, taking the bond of is dangerous for Kwara because “As we speak, Kwara State already has a debt burden of N63,366,236,320.99, placing 25th of 36 States plus FCT. If you add the proposed N35billion, the state will jump ten places to number 15th, while she is stuck on 28th, even in GDP terms, and faced with the real prospect of dwindling revenue on all sides. The State government itself was forced to slash its 2020 budget by 20%.
“As COVID-19 continue to throw all assumptions out of the window, the national economy and, in consequence, the state economy faces a long dark winter in the months ahead. To therefore hinge the repayment plan for any loan on the state’s FAAC allocation at this precarious time is to write an open invitation to disaster.
“An important factor in deciding whether to borrow or not is the ratio of debt servicing to revenue -IGR. As at December 2019, the state government spent N8.1 billion on debt servicing, against an IGR of about N30.6 billion for the same period. This is more than 26%, and 30% for 2020. An additional burden of 55% will certainly amount to an excruciating burden on the state’s lean resources which it cannot carry.
“With all the manoeuvring that we have seen around this proposed loan, I am afraid that government is about to embark on spending spree on popularity projects. While these projects may help the government in its politics; it may end up sending the state into bankruptcy that we may not come out of for many years. We have a recent example with one of our neighbouring states. We are in the middle of an unprecedented economic recession. Borrowing right now is therefore a totally bad idea’, the former minister added.
For his part, former Peoples Democratic Party (PDP) gubernatorial aspirant, Hon Razak Atunwa who spoke on the issue twice in his comment on the matter rubbished the figures presented by the government adding that it failed simple mathematics.
“Let me state it clearly, the request by Governor AbdulRahman AbdulRazaq is illegal. The approval by the Kwara State House of Assembly is illegal. It therefore amounts to illegality upon illegality.”
“By combined reference to the 1999 Constitution (as amended), Section 44 Fiscal Responsibility Act 2007, and Sections 223 and 224 of the Investment and Securities Act 2007, it is a requirement that the request must first have the ”Approval of the State Executive Council (State Exco) duly signed by the Secretary to the State Government. Thereafter, the House of Assembly is required to pass a Resolution approving the request…
“I vividly recall as a member of the State Executive Council in the Bukola Saraki Administration when we proposed to issue N17bn bond, the issue was discussed over a series of cabinet meetings. Details of all the projects were fully scrutinised as all the relevant commissioners and ministries were asked to justify the reasons for the projects and their estimates.
“After the scrutiny and approval by the cabinet, the request was forwarded to the House of Assembly. There was even so much more scrutiny by KWHA that some members of the cabinet took offence. But the House prevailed and did its job. A full Public Hearing was held with very many members of the public in attendance. If my memory serves me correctly, even Akogun Oyedepo attended to register opposition to it. Such was the level of adherence to due process then. That loan was fully repaid by 2014.
He said the EFCC should swiftly move to probe the flawed process if the government acted on it and put the DMO on notice also.
“First. Clearly, whoever concocted (the government defense) document is incapable of simple arithmetic. In summary, the document gives a breakdown as follows: “Infrastructure 13bn”; “Industrial park and Textile Production N5bn”; “Agriculture 7bn”; “A cumulative sum of 15bn will be spent on Education, Health, Entertainment and creative sectors. By my reckoning this gives a total of N40bn. So which are we to believe: does the Governor want to borrow N35bn or is it N40bn? The error is more than merely arithmetical. It is an insight into the insincerity with which the government is preparing to plunge Kwara State into debt in an unjustifiable, unsustainable and unaccountable manner” Atunwa added.
According chairman, Kwara Stakeholders’ Consultative Forum and a former labour leader in the state, comrade Bisi Fakayode, part of the requirements for the loan include approval of the Security and Exchange Commission (SEC) among others adding that “The State Government does NOT Need the Bond if the Government can wake up to the reality that, the management of KWIRS has failed in their responsibility and needs to buckle up “and wake up to do the needful by taping on the state potentials to generate more revenue to meet up with the needs of the state in infrastructural development and good governance.”
Meanwhile, some financial experts and professional bodies in the state have expressed caution on the issue.
According to the Head of Departments (HODs) of the University of Ilorin and its KWSU counterpart, Prof Gafar Ijaya and Dr Usman Olarewaju Sashi, there is nothing wrong with the government to take the bond. Also Director-General of the Kwara Chambers of Commerce, Industry, Mines and Agriculture (KWACCIMA), Sulyman Ayo Fagbemi backed the government on the issue. They all spoke in separate telephone charts with National Pilot weekend on the issue.
According to Ijaya, so long as the government is borrowing for production and not consumption, there is nothing with the move. He queried how many of those against the bond are paying their tax regularly. For Fagbemi, “I don’t think all the nose about the bond is necessary. Every government borrow to fund development including the United States of America especially in this period of Covid-19 pandemic. So why should Kwara be different. What we should be interested about is that projects that are tied to it and once they the right project there is nothing bad. Government is a continuum and any incoming government inherits the asset and liabilities of her predecessors. That is how it will continue to be.
In his reaction, Sashi who is also a top economist in the state said “there is nothing bad in government accessing bond through the capital market, but it must be done cautiously.
“Normally there will always be a need for government to raise bond for financed critical project. Those are indices investors would look at to invest in the state. There is no problem in acquiring debt by government provided it is for a purpose that will give back the returns and means of servicing the debt.
“I don’t know what the government wants to use the bond for. If it is meant to finance capital projects like education, hospitals and other social amenities that will benefit the people. It is a good economic decision in that respect. But if it in other way round, I will say such a move is irresponsible. He however cautioned the Kwara government to trend softly on the proposed bond so it would not become a burden.
“My advice to the government is that they have a good plan and purpose for the bond so that it will not mature to become a burden on the government,” he advised.
By Mumini AbdulKareem and Mike Adeyemi