Kwara State Government bid to access a N23bn loan from the capital market is generating ripples. Our correspondent gives an insight into the bond proposal and the disagreement with the opposition party.

Indications that Kwara State government would secure a loan in the 2014 fiscal year emerged in December, last year, when Governor Abdulfatah Ahmed, presented the 2014 appropriation bill before the legislature.

In the appropriation bill which has been passed into law, the governor hinted that the administration would during the year, access N30bn bond to complement other sources of funding especially the monthly statutory allocation which it says has dipped recently.

The government said the burden placed by the financial needs has made a recourse to the capital market inevitable to enable the government carry out mega projects requiring huge capital.

The state government during a State Executive Council (SEC) meeting in April however, decided to lower the stakes to go for N23bn bond instead of the earlier N30bn.

The state commissioner for finance, Engr. Demola Banu, who briefed newsmen at the end of the meeting, explained that the reduction in federal allocation has been a source of concern to most state governments.

He said the Kwara State government resorted to the capital market to cater for the revenue shortfall, so that the government would not falter on its promise to the people in the current fiscal year.

He allayed fears over the state debt profile, disclosing that repayment of the previous bond of N17bn taken by the Bukola Saraki administration and accessed in 2009 would be completed by the first week of August. The new bond is expected to be repaid through the Value Added Tax (VAT) and Internal revenue earnings.  

The commissioner explained that the government had demonstrated capability by making the refund as and when due without defaulting at any time, adding, “This shows that the government is very credible and a lot of investors have indicated interest in the state”.

But the government had barely finished addressing the press on the proposed loan, when the opposition Peoples Democratic Party (PDP) kicked against it, saying it is intended to impoverish the state.

Coming at a time the PDP/APC divide has deepened following the present battle for the soul of the state in 2015, the PDP pointedly accused the APC-led government of applying for the loan to finance the coming election which they said would plunge the state into unnecessary debt crisis.

They equally expressed fear that the loan would not be in the interest of the people of the state but one that would only serve the interest of a few.

The PDP’s opposition to the loan is however, not unexpected at a time the political climate is hot and the two parties are at each other’s throat on the issue of governance.

But it appears the state government is bent on going ahead with the plan.

A similar scenario had played out in 2009 when the then administration of Governor Bukola Saraki approached the capital market for a N17bn loan.

Notwithstanding the opposition that trailed the proposal, the government eventually had its way with the full consent of the State Assembly.

While the possibility of the present proposal getting majority vote in the legislature is not in doubt given that the House comprises 22 APC members and two PDP members, the cynicism to the bond proposal analysts say, has incontrovertibly placed the onus on the government to explicate the necessity of the loan in order to extricate all doubts and distrusts, as well as cynicism over the proposal.

In a deliberate step to clear the minds of the public on the proposed bond, the government last week gave a sectoral breakdown of the projects to be executed with the bond.

Addressing a joint press conference, the state commissioner for finance, his works and transport counterpart, Dr. Amuda Kannike, and the senior special assistant to the Governor on investment promotion and strategy, Mr. Abayomi Ogunshola,  tried to throw more light on the need for the facility.

The SSA explained that the proposal is a product of a painstaking analysis of the infrastructural needs of the state estimated at about N300bn.

He explained that out of the N23bn, N5.4bn would be spent on completion of all ongoing road projects and jumpstarting of new ones like the 68.5km Kaiama/Kishi road, Ilesha/Baruba/Gwanara road, among others while N7.5bn would be spent on servicing of previous N10bn loan accessed in 2012.

On the N17bn loan accessed in 2009 by the last administration which repayment is to be completed on August 5, the SSA added that projects embarked upon with the loan were aimed at creating visibility for the state and setting it up for commercial viability.

The governor’s aide explained, “Prior to 2003, a lot of people say Kwara State is a civil service state. Now if you want to change the paradigm, what you normally do is you open new windows of opportunities. What the previous administration has done which we were privileged to be part of was to create visibility for the state.

On the 10bn loan secured from Guaranty Trust Bank in 2012, the SSA said part of the loan was spent on the International Vocation Centre at Ajasse-Ipo, Harmony Holdings Limited, the state University Engineering College, renovation of five general hospitals, among others and that the balance of N7.5bn of the N10bn bond would be repaid through the loan in what the government calls loan refinancing which it says would save the government of N500million monthly.

“So we are not doing anything that is out of place or that is strange in the market. It is the norm”, Ogunshola said.

The state governor during an interactive session with newsmen early this month allayed fears from members of the public on the loan, saying Kwarans should be concerned about what the government intends to do with the money.

But the PDP chairman, Chief Iyiola Akogun, insisted that the loan was being accessed to hamstring incoming administration in the state and called on Kwarans to stand up against it.

“Consistently the government has been running the administration on borrowed money and therefore why should they take further loan? They want to take more loans so as to hamstring any incoming administration so that if any other person now comes in, they would not be able to do any other thing than to service those loans; it is not the best way to run the affairs of our people”, he said.

But the APC defended the government, saying no reasonable Kwaran would oppose the bond when the impact of previous bonds could be seen and felt by all and sundry.

Speaking with Daily Trust, the state APC secretary, Prince Yemi Afolayan, said the PDP is only playing politics with the issue.

 “This is a party whose image is at the lowest ebb and then for them to complain and talk about a government that is purposeful; a government that is performing, you would know that they are talking with their tongues in the cheek,” he said.

The controversy has continued as both sides try to prove their point, but it is doubtful if the state government would be dissuaded by mere criticism from the opposition PDP.