States debt burden: Figures on the rise, infrastructure deficit persists

The debt profile of the country’s 36 states is on the rise, and there appears to be no end to it. Yet, there is a little disclosure about justifications for the loans, or how they were approved by the state assemblies, whose constitutional roles is to vet application for such loans.

As at December 2016, the debt burden of states had risen to N3.342 trillion, that is 55.15 per cent of the 2016 budget of N6.06 trillion, and 45.8 per cent of the 2017 budget estimate of about N7.3 trillion, according to Nigeria Extractive Industries Transparency Initiative, (NEITI).

The NEITI report lists Lagos, Delta, Osun and Akwa Ibom as states with the highest debt profiles, totalling N1.262 trillion. The figure represents about 38 per cent of debts owed by the 36 states.

Lagos is indebted to the tune of N603.25 billion, Delta owes N331.95 billion, while Osun and Akwa Ibom are indebted to the tune of N165.91 billion and N161.23 billion respectively.

In the last five years, states like Plateau, Ogun, Delta, and Nassarawa, have consistently increased their borrowing as shown in another report published by BudgIt, a local civil society organisation that specialises in budget monitoring.

For instance, Delta State’s debt profile rose from N93. 3bn in 2011 to N331. 95bn in 2016; that of Ogun State rose steadily from N4.5 billion to N103.75 billion; and Plateau State moved its own from N24. 2bn to N104 billion, all within a period of five years.

What is even more disturbing is the fact that the disbursement of these loans is shrouded even in greater secrecy, and unknown to the public on whose behalf the loans were sought, and to the civil society groups that monitor spending by states. In all of these, the people’s representatives at the various states’ assemblies remain uncritical of the spending culture of the executive arms, as well as their endless request for more loans.

Despite the conditions tied to the N90 billion bailout fund, provided by the Federal Government, none of the 36 states has made their budget implementation report available to the public.

Various anti-corruption groups, opposition parties, citizens and the media that have requested for details of the project for which the loans were expended, under the Freedom of Information Act (FOIA), were snubbed by the state governments.

Nyesom Wike

Back in 2o13, the Socio-Economic Right And Accountability Project (SERAP) demanded for information on how Lagos State spent $90m loan obtained from the World Bank to improve education in public secondary schools; BudgIt last month requested the publication of full budget and projects carried out by Rivers and 18 other states; an indigene of Adamawa, Aliyu Gengele, of Anguwan village, recently asked the state government to make available details of how it utilised the state’s share of the Paris Club refund; opposition parties in Lagos State have at different times asked different administrations to disclose the state total debts. All of these requests were declined.

In fact, most states, except Ekiti, have insisted that they are not bound by the FoI Act. This position has generated criticisms from legal practitioners, such as Mike Ozekhome SAN, who said the FoI Act applies as a statute of general application to all states of the federation, and all parastatals in the country, whether federal, state or local government.

According to the silk, it is a statute of general application meant to enthrone transparency and accountability in governance across the country.

Despite the criticisms, many governors continue to apply for more loans every year with little regard for transparency and accountability.

This year, 10 states have applied for $1.5 billion from the African Development Bank, and the Islamic Development Bank.

While Ogun and Kaduna states have asked for $350 million each, Plateau, Enugu, Kano and Ondo states are requesting for $200 million each. Also Katsina State has asked for $110 million, Abia State is requesting for $100 million. Ebonyi State is asking for $70 million, and Jigawa State $32.4 million.

Some of these states, including Ogun, Jigawa, Akwa Ibom, Katsina and Rivers, were listed as non-compliant states in their debt data reporting to the DMO, as at December 31, 2016.

Justifying their request for additional loan, Ogun State officials said the loan attracts only two per cent interest, against the 22 per cent obtained in the local financial sector, adding that the facility is also payable over a period of 25 years, with a five-year moratorium.

In a response to The Guardian’s earlier report on Osun’s debt profile, the state government justified the need for additional loan saying, “With a state lying prostrate before the coming of Ogbeni Aregbesola, one of the options open to the government was to seek financial helps from all corners of the world; get contractors who could deliver on projects through convenient payment arrangements, and be ingenious in the application of the scarce funds,” Sola Fasure, media adviser to Governor Rauf Aregbesola, wrote.

Rauf Aregbesola, Governor State of Osun.

Like Ogbeni Aregbesola, Governor Nyesom Wike, of Rivers State has also defended his decision to add to the N14.7billion debt burden left by his predecessor, Rotimi Amaechi, now Transport Minister.

He said the huge infrastructure development challenge facing the state and his administration, makes it imperative for the state to continue to seek for loans.

The state government’s response over the years, when queried about its huge debt profile, has always been its acclaimed capacity to pay back whatever loan it has taken. In fact, it usually flaunts its huge internally generated revenue that is rising just as the debt profile.

In one of his letters to lawmakers, Wike said the huge infrastructure development challenge facing his administrations efforts to address the situation makes it imperative for the State to continue to seek for loans.

Chairman House Committee on Information and Strategy of the Lagos State House of Assembly, Tunde Buraimoh, was miffed over the opposition’s complaint about the state’s debt burden “when they know that the government is using the loan wisely by building infrastructure that will bring development.”

While insisting that the Assembly would not have approved any loan request for the government if there was no justification for such, he stressed that Lagos has capacity to wipe off its debt in three years if it chooses to do so.

Most of the debts, he said, were acquired by the previous government. “And if not for the financial competence of Governor Akinwunmi Ambode, Lagos would have found it difficult to embark on any serious project,” he said.

Chairman, Centre for Anti-Corruption and Open Leadership (CACOL), Debo Adeniran, is concerned that Lagos is taking the lead in foreign and domestic debts as confirmed by the recently released report on Federation Accounts Allocation Committee (FAAC) by (NEITI).

He said with the debt profile standing at N603.5 billion, “ it becomes scary when the potentials or capacities needed to service or repay these loans appear to be latently unavailable. And considering the background of a country whose mono-economy relies basically on oil, a commodity that several countries across the globe are consciously abandoning makes the future even scarier when properly contemplated with circumspection.

“The unfortunate part for the people is that, hardly are the loans adequately prioritized for the real needs of the people above their felt-needs. The processes involved in loan taking by government too are rarely popular or participatory enough, which make them vulnerable to the perpetration of corruption by some elected and appointed public officials. The processes are always encoded in languages designed to achieve opaqueness at the end through ‘rocket-sciencing.’

“Therefore, it is expedient that when the state government opts to take these loans, it must simultaneously and meticulously plan for the repayments and servicing of the debts to avoid passing the burden to the future generation. Astute discretion to avoid/avert sharp practices; plausible mismanagement, misappropriations and outright embezzlement must be applied.”

Meanwhile, opposition parties in different states are not persuaded by the explanations given for debt accumulation.

That explains why the Chairman of Labour Party in Ogun, Abayomi Arabambi, blamed the state lawmakers for acting almost as the rubber stamps of the executives. Under their watch, the government is putting a heavy burden of debt on the state, he alleged.

“My party wrote to the House of Assembly under the Freedom of Information Act (FoI), demanding information about all road projects that the state government has awarded since 2011 till date. But the lawmakers declined the request. That is why the party has raised the alarm about the additional $350 million loan because a good part of the loan will disappear into private accounts and nobody will know about it. Imagine the government claiming to have spent N46 billion to build 20 mega schools at the cost of N2.3 billion each.”

Similarly, Osun State- based rights group, the Civil Societies Coalition for the Emancipation of Osun State (CSCEOS), also submitted a protest letter dated March 2, 2016, to the state House of Assembly, through its Speaker, Najeem Salaam, accusing members of the Assembly of being unconcerned about the plight and welfare of the people of the state they claim to represent.

The group claimed that lawmakers and state executives were colluding to keep information about the latter’s spending secret.

Though the country’s constitution mandates state assemblies to perform oversight functions on governments’ spendings, lawmakers often fail to discharge this duty effectively, says Sola Ajao, a lawyer and an All Progressives Congress (APC) member in Osun State.

Chairman, House Committee on Information and Strategy, Osun State House of Assembly, Olatunbosun Oyintiloye, debunked the claim that lawmakers were acting as rubber stamps.

“We must situate arguments that border on loan requests in proper perceptive. No doubt, it’s the responsibility of the state House of Assembly to approve loans requests by the executive, which is a functional part of separation of power. To say that the Assembly rubber stamps requests of loan is not correct.”

He said request for loans are not done on single sheets of papers, but come with valid documents that would justify the purpose money requested for would serve, and lawmakers examine these requests in the light of its value, and merit.

Oyintiloye, who said all loans approved by lawmakers in the state were in the best interest of the people, described the allegations of gratification as cheap blackmail.

“It’s not fair to make such sweeping remarks. Lawmakers are politicians, they are in power for purpose of representation, and to ensure that their constituents get their proper share of resources without the feeling of marginalisation. The fundamental drive of our activities is to see that the need of our people is taken care of, in terms of infrastructure, overall wellbeing and their welfare. Each member lobbies to ensure that his or her people are not left out. Lobbying to get the dues of your people is not gratification, it’s rather a tool to achieve your goal.”

But the state lawmakers are indicted not only by outsiders, but also by one of their own. A former lawmaker in the Cross River State and a chieftain of the All Progressive Congress, Cletus Obun, said the Assembly in his state either lacks the capacity or the will to carry out its oversight function of monitoring and superintending the activities of the executive.

He lamented that the burden of debt accumulated by states has great implication on development in the future.

“What we are doing is piling of more debt for invisible and white elephant projects, and this is a dangerous trend. In 2002 I had predicted that in eight years the state’s debt profile will rise in a manner that it will be a thing of fear and dread for anybody to serve as the governor of Cross River State because of the debt profile,” Obun said.

Similarly, APC’s publicity secretary in Rivers State, Chris Fine, said Governor Wike has from inception embarked on indiscriminate borrowing at cut-throat interest rate from Nigerian commercial banks.

“We have consistently raised the alarm that the governor was borrowing away and mortgaging the future of Rivers people, cautioning him to have a rethink,” he alleged.

If anyone wants to know how public fund is embezzled, he/she should look through the procurement process, said an anti-corruption expert, Mohammed Atta.

According to him, a good part of the loans collected by states are not spent on projects for which they are collected, as they disappear through procurement corruption, which accounts for over 70 per cent of the total corruption in the public sector.

Though the Procurement Act of 2007 was enacted to prevent this malfeasance, implementation has remained a problem, especially at state level, where the Act is yet to be domesticated or poorly implemented. Section 5 of the Act requires government agencies to publish the details of major contracts, but most states do not comply.

Rev. David Ugolor, a public affairs analyst and human rights crusader, said poor procurement policy at the states’ level remains a major issue that also requires the Federal Government attention.

Ugolor, who is also the Executive Director, African Network for Environment and Economic Justice (ANEEJ) said most states have no procurement laws, unlike what obtains at the federal level, adding that even those that have this law do not implement them.  This is a critical problem that needs to be addressed.

“Substantial loans procured by states government from the capital market are not judiciously utilised for the purposes they claim to use it for, and these are the problems, which would have not happened if states’ Houses of Assembly were working as the public eye. If the procurement rules were followed, the current debt profile would have been avoided and possibly the resources would have gone into a more productive development project that will promote economic growth and reduce poverty. The poor compliance by states to procurement laws, and the absence of proper Fiscal Responsibility Framework that would guide the way resources are used, contributes to undermining the debt management system in most of the states.

“Most of these loans are approved by the assemblies without serious scrutiny. This is really a big problem in all the states, which most of the governors have exploited to embark on massive borrowing. The constitution is very clear about the role of State Houses of Assembly in approving the annual budget, which determines the borrowing agenda. Most of the Houses of Assembly are very weak and they also have the problem of capacity to undertake an independent scrutiny of requests from state governors.

Chambers Umezulike, senior programme manager at Connected Development, is of the view that the level of transparency in northern states is higher than what obtains in southern states.

He identified states such as Yobe, Adamawa, Kano and Kaduna as being more transparent in the way they handle projects.

An economist, Claudius Emeka, intoned that as states’ debt continues to soar, people are bound to be concerned about the future. But if the loans are used properly to support economic growth, there is nothing to worry about.

“Problems will arise when monies borrowed are squandered on infrastructure that are not profitable to states as it were,” he said

Acting Chairman, Fiscal Responsibility Commission (FRC), Mr. Victor Muruako, maintains that the rising debt profile of states should be a cause of concern to the nation at large.

Meanwhile, the Federal Government has decided not to continue supporting states for more debt acquisition because there was no longer huge allocation to states from the Federation Accounts Allocation Committee (FAAC), from where borrowed funds could be deducted.

The Director General of Debt Management Office (DMO), Ms. Patience Oniha, has instead advised states to imbibe frugality and a new strategic way of fiscal planning and implementation.

This obviously is not enough as lawmakers would have to play a critical role in keeping state governors’ appetite for loan collection in check.