The planned move by Governor Abdulrahman Abdulrazaq to approach the capital market for a bond facility of N35bn has attracted rash criticism from Kwarans who have argued that such decision is needless in the present circumstance. ACTING EDITOR, MUMINI ABDULKAREEM writes on the issue.
In recent weeks, the Kwara State Governor, Mallam Abdulrahman Abdulrazaq has come under the spotlight but for the wrong reasons over the decision to approach the capital market for a bond of N35bn he said will be used to accelerate the pace of development in the state.
But no sooner than the news hit the airwaves that it started to attract several interventions and disparagements many of which knocked the Governor and his government for embarking on a needless journey that will not only put the state in a precarious and impoverished situation but one that will ultimately mortgaged the future and prospect of the state.
A cursory look at the development according to many political analysts shows that the issue of the bond has been one that has attracted the most criticisms from the political and civil societies in the state including those from the Governor’s party, the ruling All Progressives Congress (APC). The commentaries did not also spare the Kwara State House of Assembly as they further took a swipe at the legislature for its role in granting the House approval to enable the executive assess the bond.
Explanation/Reason for bond
According to the government in one of the statements to explain the reason and propriety for the bond, “There is a lot more to be done (in the state). Kwara requires huge investments in strategic infrastructure and revenue-generating vocations to widen the economic base of the state without resorting to undue taxation of the citizenry. For this reason, following a cabinet approval for same on December 24, 2020, the Governor has secured an approval from the parliament to raise N35bn bond from the capital market to fund new and existing infrastructural development and various economic projects that will drive growth and create jobs for the people. The step is no moot point, given the plummeting revenue from federal allocations and internally generated revenue, mounting government’s obligations to the people, as well as the imperative to put the state on a sound footing. The bond has a tenure of eight years and it is tied to an irrevocable standing payment order on federal allocation…”
The government further explained that “the new bond is positioned to provide the building blocks of a new Kwara to trigger massive youth employment across all sectors whilst providing good public services, and an enabling environment for meaningful engagement and livelihood for all”. A document illustrating some of the projects was also speculated by the government handlers.
Rubbishing Govt’s Defense
The Government had hardly finished stating its position that torrents of condemnation came tumbling in from the “four walls” of the state. It was former Peoples Democratic Party (PDP) gubernatorial candidate in the 2019 election, Hon Razak Atunwa that opened the floodgate when he questioned the approval by the House of Assembly despite the request and process fraught with illegalities. Atunwa’s intervention was twice, the second being his piece that punctured the defense of the government on his first condemnation on the issue.
First, the former Speaker accused the Governor of collaborating with members of the legislature to embark on “a glaringly illegal scheme to borrow N35bn without due authority or due process.”
He said “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 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.
“Unfortunately, such scrutiny is now non-existent. The speed and alacrity with which the request was honoured is a further testament to the fact that the House is either gloriously unaware of the legal requirements for such a loan or have permitted themselves to become a willing tool in the hands of the Governor to fulfill his whims and caprices.”
“Governor AbdulRahman AbdulRazaq dissolved his cabinet on 31 December, 2020. He has not reconstituted a State Executive Council since then. So, on what basis did he send the request to the House? The DMO does not recognise request for a loan by a “Sole Administrator”. The KWHA should have sent the request back.”
“Instead, the KWHA acted on an illegal request and passed an illegal Resolution. To make matters even compellingly worse, the House did not hold a Public Hearing, as it should, before approving such a monumental amount. Perhaps, this is not surprising because the request did not provide full details of projects”, he added.
He said the EFCC should swiftly move to probe the flawed process if the government acted on it and put the Debt Management Office (DMO) on notice also.
The attempt to justify the process by both the government and the House further drew the venom pen of Atunwa who “rubbished” both defenses.
Further Defense
According to the House, “The process leading to approval of the N35bn Bond request followed all due process and complied with all regulatory requirements.
“His Excellency, Governor AbdulRahman AbdulRazaq communicated the request for approval for the Bond to Kwara State House of Assembly via a letter dated January 7th, 2021, with State Executive Council approval dated December 29th, 2020, duly signed by the Secretary to the State Government attached in compliance with extant Laws. Between January 7th, 2021 when the Honorable House received the Governor’s request and January 26th, 2021 when the request was read on the floor, the House embarked on series of consultative activities which informed its conviction that the Bond would ultimately serve public interest. Consequently, the request was debated extensively on the Floor of the House on 26th of January, 2021.
After rigorous scrutiny, the House was of the conviction that the Bond, if secured will serve public interest and address the overwhelming infrastructural deficit in the State. The House was confident that from all available documents presented before it, the process conformed with all relevant lawful provisions. These therefore informed the Resolution of the House, as required by Law. As against claims by Hon. Atunwa, Council Conclusion of the State Executive Council dated December 29th, 2020 (before the erstwhile cabinet was dissolved) was attached to the Governor’s letter to the House, thereby nullifying the assumption that the Governor acted unilaterally.
“While we are open to constructive criticisms from the opposition and Kwarans of good conscience, we urge Rt. Hon. Atunwa and stakeholders alike, to ensure their future comments and submissions on state matters are guided by the truth and unabashed patriotism” the lawmakers added.
Second Intervention
But the defense of the government and the legislature further led to the former’s speaker picking more holes in the rationale behind the loan.
In a piece titled “The N35bn Sham Document: Nonsense upon stilts”, Atunwa noted that “In an apparent knee-jerk reaction to the statement I issued on 1 February 2021 and the general public outcry about the illegality Governor AbdulRahman AbdulRazak is about to perpetrate on the treasury of Kwara State, the State Government hurriedly released a document purporting to provide a breakdown of the purpose of the loan titled: Kwara Government N35bn bond explained.
“Let me say quite categorically, that the document is nothing but a sham. It reads more like a poorly written kindergarten pamphlet. For a document designed to satisfy strict requirements of various legislation, it fails abysmally. Quite apart from the grammatical and typographical blunders it contains, the document is riddled with incongruity and befuddlement.
“First. Clearly, whoever concocted that document is incapable of simple arithmetic. In summary, the document gives a breakdown as follows: “Infrastructure N13bn”; “Industrial park and Textile Production N5bn”; “Agriculture N7bn”; “A cumulative sum of N15bn 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.
“(Also) for a document purporting to provide a breakdown, it actually raises more questions than it answers. For example, it fails to list the so called “37 road projects across the three senatorial districts”. One would have expected to see each road listed together with a cost estimate for its construction. The Ministry of Works should have prepared a Bill of Engineering Measurement and Evaluation (BEME). The same goes for all the so called projects listed in the document. Figures seem to have simply been plucked out of the thin air to arrive at a predetermined amount. The document hardly fulfils the “cost-benefit analysis” required by federal legislation.
Third. It is an indispensable requirement that any such loan must be provided for in the Appropriation Law, i.e. the Budget. Sections 120 and 121 of the 1999 Constitution (as amended) is abundantly clear that no moneys shall be received or spent by the state government without an appropriation law. Section 44 of the Fiscal Responsibility Act 2007 also makes the same requirement. So does Sections 223 and 224 of the Investment and Securities Act 2007. This proposed loan is nowhere to be found in the 2021 Budget submitted by the Governor and passed by the House.
“Kwarans will recall that when the Bukola Saraki Administration wanted to raise the N17bn bond, it commissioned a renowned international credit rating agency, Fitch Ratings. The state’s financial and economic outlook was rated “B+/AA-” This was the first time any state in Nigeria was rated above that of the national rating. It is therefore manifestly obvious that this proposed N35bn loan is a non-starter. Perhaps, this accounts for why the Governor has employed subterfuge in order to surreptitiousness sneak this untenable loan past the Kwara public”, he submitted.
More Criticism
For his part, former Minister of Sports and Youth Development, Bolaji Abdullahi in his write-up “Why This N35Billion Debt Is Dangerous For Kwara” noted that “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. These figures are upward for the total revenue as well. An additional burden of 55% will certainly amount to an excruciating burden on the state’s lean resources. Kwara state cannot carry this burden.
“Lastly, but perhaps most importantly is the issue of debt impact. What the government intends to do with this proposed borrowing is still shrouded in mystery. However, if we go by what we can see, it would be safe to assume that this loan would not be targeted at the state’s economic growth areas. Conventional wisdom is that money should be used to make money. Too many of our people are today mired in abject poverty; only a job-led economy can lift them up.
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 governor really needs to change his economic advisers. To increase the state’s debt profile by 55% in one 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”.
More Questions
For the Elites Network for Sustainable Development (ENetSuD), the civil group questioned the Hon. Salihu Yakubu Danladi-led Kwara State House of Assembly (KWHA) over the bond.
In a statement signed by its Deputy Coordinator (Administration), Mrs Usman Radhiyyat Taiye, popular CSO requested that “The exact amount of bond requested by Governor AbdulRahman AbdulRazaq, the exact amount of bond approved for the Governor by the KWHA, the detailed budget of the projects that the bond is proposed for (including the name of each project, the amount budgeted for each project, the contract sum of each project, the location of each project, and the executing Ministry, Department, and Agency of each project), the project codes, names and other information on the projects that the bond will be used for as contained in the approved 2021 budget, the proposed payment plan for the bond, among others.
