Mr. Udom Emmanuel, Governor of Akwa Ibom State. (Credit : Facebook)
By Abasifreke Effiong – Uyo
Nigeria Union of Journalists, Akwa Ibom State council, has urged the State House of Assembly to show restraint in approving loan requests sent by the Governor.
This was part of the decisions taken at the July congress of the State Council of the Union held at the press centre, information drive, Uyo.
The NUJ expressed concern over the debt profile of the State recently released by the Debt Management Office and called on the House of Assembly to show restraint in approving new loan requests from the executive.
“Congress expressed concern over the high debt profile of the State as indicated in the recent report of the Debt Management Office, DMO, and urged the State House of Assembly to show restraint in approving further loans requests from the Executive and be guided by the provisions of the Fiscal Responsibility Act”, a communique from the Union states.
The Union’s position came two weeks after the Akwa Ibom State House of Assembly granted Governor Udom Emmanuel’s fresh N7 billion loan request.
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Akwa Ibom State was the second highest indebted State in the Niger Delta and the third in country according to the ranking released by the Debt Management Office in March 2021.
According to the report, the State’s domestic debt stood at N232.2 billion as of March 2021.
On July 15, the Akwa Ibom State House of Assembly approved a N7 billion loan request sent by Governor Udom Emmanuel.
Assembly correspondents quoted the Speaker of the House, Mr. Aniekan Bassey, as reporting that ‘N2 billion of the said amount would be obtained from the Central Bank of Nigeria at a 5% interest rate per annum’.
The Dune gathered that the remaining N5 billion would be collected from a newly-formed housing and estate company called, Family Home Funds Limited, FHF, at an undisclosed interest rate.
FHF,registered as a limited liability company in 2017 and started operations in 2018, seeks to provide “affordable homes for Nigerians on low income”, according to information posted on its website.
Chairman of the company is Mr. Suleiman Barau. Barau is also chairman of Red Star Express Nigeria (a logistics and courier company) and former deputy Governor of CBN and MD of Nigerian Security Printing and Minting Plc.
With the new loan, the State’s internal debt has risen by N7.350 billion, assuming the FHF’s N5 billion loan was obtained at 5% interest rate per annum as that of the CBN.
Mr. Aniekan Bassey, Speaker, Akwa Ibom State House of Assembly. (Credit : Facebook).
The State’s internal debt obligation now stands at approximately N239 billion and would accumulate accrued interests of at least N12 billion by Q2 of 2022, at a minimal 5% interest rate.
In 29 months, (February 2019 – July 2021), the Udom Emmanuel administration has added N146.350 billion in loan debt to the State’s debt profile.
The State internal debt burden stood at N98 billion only as of January 1, 2019.
According the Akwa Ibom State financial report and audited statements, the State government spent N12.2 billion on repayment of interests on loans in the 2019 fiscal year alone.
Policy Alert, a non-governmental organisation working on fiscal and environment justice says the State spent 40% of the N22.5 billion posted as loan repayment in 2020 on servicing interest rates on domestic debt.
“In 2020, the State spent N25.2 billion on loan repayments, with over 40 percent of that amount spent on servicing interest rates on internal loans.”
Last year, the organisation told the Akwa Ibom State House of Assembly that the State’s debt burden was getting “unsustainable”.
However, the House of Assembly has continue to approve more loan requests for the Governor.
Policy Alert’s Communications and Stakeholder Engagement Officer, Mrs. Nneka Luke-Ndumere, said the State government’s decision to obtain a fresh N7 billion loan was in breach of the State Fiscal Responsibility Law, adding that the trend of loan acquisition by Udom’s administration is questionable.
“The Fiscal Responsibility Law which should guide the State in matters like this provides that the State Government shall not only specify the purpose for which every borrowing is intended but must also expressly and convincingly present a cost benefit analysis detailing the economic and social benefits of the purpose to which the intended borrowing is to be applied.”
“The state government failed in its fiscal responsibility by not providing these prerequisites for loan acquisition and the House of Assembly on its part failed in its responsibility by approving the loan request without interrogating it against the provisions of a law it made recently.”
“We must understand that there is a very questionable trend of loan acquisition in the State which makes the debt profile of the State very close to unsustainability because these loans are not self-liquidating. Instead, the state pays hugely for interest on these loans.
“Do not forget that the State in 2019 which was an election year acquired loans to the tune of N48 billion and in 2020 acquired N7.8 billion. Now, in just half part of the year, N7 billion has been approved for acquisition. You can now predict the expected trend before the end of the fiscal year. We cannot continue with this trend of frivolous loan acquisitions.”
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The organisation also noted that it is alarming the rate at which the debt burden of the State has grown between January 2019 and last month, July.
“As of January 1, 2019, the state’s outstanding loans stood at just N93 billion, but the debt stock has now risen to N232 billion excluding the N7 billion approved last month. Imagine the enormous social opportunity cost of future loan repayments.”
“It is alarming to imagine the lives that could have been touched by billions of naira wastefully spent in this way over the years and the possible uses of the money that will be spent servicing future loans as the state’s debt continues to rise.”
Policy Alert in the statement sent to The Dune urged the Akwa Ibom State House of Assembly “to redeem its image by reviewing its decision on the loan approval” it granted the Governor on July 19.
