I am propelled to lend my voice to the ongoing vital issue, regarding which I also consider asking some cogent questions since there is no other place that we can call home other than Oyo state.
This is about the Oyo State Government’s approval of the issuance of a N100 billion private bond tagged “Oyo Prosperity Bond” to facilitate the execution of what they called “priority projects” meant to drive economic development in the state.
A bond, simply put, is a fiscal income made by an investor to a borrower.
Let it be borne in mind that my innocuous questions are not to muddle up the waters, cause unnecessary stir nor make cheap political statement. I just read a book written by Karl Meier titled “This House Has Fallen” and I sincerely wondered how we can save our own home from another calamity.
Given that there is no state that will not need borrowing to get solvent, the pertinent question remains at what volume can they afford to borrow? Since there is no free lunch even in Freetown, can we continue to borrow money when the economy is depleting? This causes for a disquiet concern for all and sundry.
It is a swings and roundabouts thing. If we are to service the bond to 20 – 25% of our hard-earned IGR, it behooves us to boost our IGR significantly. May God forbid it that oil, which is the mainstay of our economy, refuses to sell at the international market today, the states will be hard-hit as no state will get a dime from the Federal Government.
For the 100 billion naira bond, at least 22 billion to service it at this defining moment when we are faced with harsh realities of COVID-19 leaves me worried.
Going by a statement emanating from the desk of GSM, the State is paying 14% in 12 years. Can the state earning below 100 billion take the said amount as a loan at this crucial moment? We are quick to draw comparison between Oyo state and other states without stating the realities of our IGR status.
Lagos has about 399 billion naira in internally generated revenue, followed closely by Ogun state which has recently grown its IGR by 14.1% totaling up to 70.9 billion. These two states are home and dry for any loan.
Government needs to be more open and transparent in its deeds. Bond is good for developmental purpose if the terms and conditions attached are to be adequately met without shifting the burden on the hapless masses.
What happens to defaulters of such loan or secured debt? How do lenders reclaim the fund due to them? In other words, can a lender take a legal recourse? Should a government that is interested in lifting the state from the pond of poverty to the ocean of prosperity resort to taking loans?
It becomes germane that considering the dwindling allocation coming from the FG, the masses deserve to know how the state IGR can be doubled and the nitty gritty of the bond, including its repayment plan and time frame.
I worked with the late Lam Adeshina as an economic advisor during his administration. We were just three then and we bought large quantities of shares to boost our IGR, which of course was frittered away by successive administrations. Lam Adeshina couldn’t touch bonds with a long pole. It should also be noted that Oyo state is not rentier state and we all feed from the crumbs coming from the government. Let us not add more yoke.
We were told recently by GSM “why 21 kilometres Ajar airport project is costlier than 63 kilometers Iseyin-Akinyele road previously awarded by late Abiola Ajimobi’s administration”, and one begins to wonder when the federal airport fell under the purview of state renovation.
Make no mistake. I believe that some of these works are laudable and essential to the state’s development. However, we should ask ourselves if they are just money guzzling projects or the ones that would be self-sustaining and bring economic boon to the state.
Will the present government not be burdened by loan repayment to the extent that the next administration will be incurring huge debt of large magnitude? Will the state leapfrog to financial solvency or remain stagnated by the burden of loan repayment? These are some of the questions boggling my mind and ones that are clamouring for immediate answers.
Adesoji Akanbi represented Oyo south senatorial district between 2015 and 2019.