The immediate past commissioner of finance in Oyo State, Mr.Bimbo Adekanmbi has described the N100 billion prosperity bond the Seyi Makinde led administration is set to collect as an exercise that will plunge the state into financial bondage.
OYOINSIGHT.COM reported that the state executive hadapproved the prosperity bond to embark on some infrastructural projects in the state.
Adekanmbi, while speaking on the YS Live, a political programme on Ibadan-based radio station, Splash FM monitored by OYOINSIGHT.COM, stated that the bond was poorly designed and he is sure the governor is yet to go through its details.
“I am sure the governor is yet to check it because there is no way he will go through the details of this bond and then come out with it.
“Probably because of the festive season and the COVID-19 pandemic, the governor has been so busy, he may have plans to check the file later.”
Adekanmbi stated that there is nothing bad in accessing loan but maintained that the Security and Exchange Commission, SEC, should be approached for advise.
Speaking on why private bonds, which is the nature of the bond, is not advisable, he said, “Private bonds don’t work, it crashes all the time. If they collect this bond, we will be in bondage for twelve years.
“For civil servants, if this bond is accessed and the federal allocation drops…this is how it works.
“They can say this is the first tranche and this is the project we plan to embark on with it and this is the contractor.. The contractor will receive the money but the state government will give him the guarantee because the money will be withdrawn from the ISPO in the sense that before the government pays workers salary, the money would have been withdrawn from Abuja.
“The terms for this particular debt states that whether the contractor works or not, we will keep paying back the bond, whether the government sends the contractor away or not, they will withdraw it.”
He stressed that a private bond will not allow the state government have control over how the money for each project was spent.
He also described this private bond as “onerous, vexative, and cruel” because “it is similar to an attempt to squeeze the heart of Oyo state.”
Adekanmbi also emphasised that the current administration had already borrowed almost N50 billion since it resumed, bringing the state to a very dangerous gearing levels. “As such, the government finds it difficult to approach SEC or to issue a public bond. Hence, its recourse to the non regulated private bond and also to amortization of the bond over 10 to 12 years instead of a maximum of 7 years. This will force the repayments under an acceptable threshold, but the longer tenure greatly increases the premium paid by Oyo taxpayers,” he added.
Speaking on the risk free rate of the budget, Adekanmbi noted that during the tenure of the late Abiola Ajimobi, the risk free rate in the country was 15 percent and Ajimobi collected loans at a risk free rate of 16.5 percent.
He, however, questioned why the current administration plans to collect a loan with a 14 percent risk-free rate despite the fact that the current risk-free rate in the country is 6.5 percent.
“With the proposed N100B, the current risk free rate is 6.75% and the current HCF said they will borrow at 14%, which is 725 basis points above Risk free. If compared to Ajimobi bond, it should be 1.5% plus 6.5% and not 14%, which is onerous.
“When Oyo State borrowed under Ajimobi in 2015, the state had a credit rating of “A-” and was the cheapest of other states like Zamfara, Kogi and Plateau.
The former commissioner alleged that the state government just spent N4 billion on the purchase of official vehicles.
He argued that in Africa, there is no private finance infrastructure bond like the state government wants the people to believe.
Adekanmni, a forensic accountant also challenged the current commissioner of finance to a public debate on the controversy surrounding the N100 billion prosperity bond.
