By Frank Nweke II
WITH an alarming internal and external
debt profile of approximately N183 billion,
it is baffling to see the Enugu State govern-
ment attempt to borrow an additional N170
billion.
In effect, this administration seeks to
open its loan portfolio with an 182.79%
increase above the N93 billion domestic
debt accumulated over the eight years of the
Ifeanyi Ugwanyi administration. It is also
interesting to note that the loan amount
exceeds the 2023 total budget presented in
December 2022.
This will take our State above the stipu- lated borrowing limit by the Debt Manage-
ment Office by 226% and will place Enugu
State as the 4th most indebted State in the
country.
In the past year, I have spoken extensively
about the poor fiscal conditions of the state
and the need for drastic cost-cutting mea- sures and strategic prioritisation to pull us
out of the economic morass that the previ- ous government had plunged us into. The
Ugwanyi administration closed with a
domestic debt of N93,197,207,627.52 and an
external debt of $120,667,083.51. The pros-
pect of further increasing our debt profile is
not in the best interest of our economy.
At present, Enugu State’s debt per capita
ratio, which represents how much debt the
government owes on behalf of each citizen,
stands at N23,907. This additional N170
billion will double and triple our debt per
capita ratio over the next year. This means
that the government will owe an estimated
N67,500 on behalf of each citizen, which
is a far cry from the zero per cent poverty
headcount index promised by this adminis-
tration. To put this in perspective, the state
spent N3,506.84 per capita on education
and N1,559.1 per capita on health in 2022.
Enugu is currently the 10th poorest state in Nigeria and the second poorest in the
Southeast with a poverty rate of 58.13%
behind Ebonyi State.
The stagnant economic situation in the
past decade begs the question of what the
previous debts incurred were spent on.
Roads, hospitals, and schools are in deplor- able states. Teachers’ salaries and pensions
remained unpaid for several months despite
the huge sums quoted through the years.
While I am not against borrowing for de- velopment purposes, it should be consistent
with the Open Governance Partnership
requirements for transparency and account-
ability, per the provisions of the Debt Man- agement Office for fiscal responsibility, and
with the citizens apprised of the purposes of
these facilities.
This recent development raises several
concerns.
According to the provisions of the Debt
Management Office, for Domestic Capital
Market borrowing, States and FCT are to
ensure that their total amount of loans out- standing at any particular time, including
the proposed loan shall not exceed fifty (50)
per cent of the actual Total Revenue for the
preceding year. (Investment and Security
Act, 2007, Part XV, 223 (1b) quoted in the
provisions of the DMO).
With Enugu’s reported actual total
revenue for 2022 being N128 Billion, the
acquisition of a domestic debt of 170 Billion
which takes our total debt profile up to
approximately N354 Billion will exceed the
stipulated limit by 226%. (I must make a
side note about the herculean task of down- loading the quarterly performance reports
from which the total revenue for 2022 was
extracted, as it is unavailable anywhere else)
The Act also provides that “The DMO
shall conduct a Debt Sustainability Analysis
to ascertain that the Monthly Debt Service
deduction of the State or FCT, including the
servicing of the proposed bank loan being contemplated, does not exceed 40% of the
Total Monthly Revenue (FAAC and IGR)
of the State or FCT for the preceding 12
months, and make a recommendation to the
Minister as appropriate.”
First, the government is in breach of the
law and intentionally jeopardising the eco- nomic health of the state and ultimately, the
welfare of the people. Concerning the stated
percentage allowed for debt servicing, what
is the viability of maintaining a monthly
debt service deduction below 40% of our
revenue when the State’s total liabilities are
consolidated? If it technically falls below
the threshold, how will this reflect on the
economy in real terms? Unfortunately, the
figures and terms of our indebtedness are
not readily available for public evaluation.
The government must shun the practice of
opacity in managing the state’s accounts and
embrace transparency.
Secondly, the financial institutions of-
fering these facilities will also be acting in
breach of the law and liable to sanctions as
provided. Have Fidelity Bank and Globus
Bank calculated the costs?
All banks and financial institutions shall
request and obtain proof of compliance with
the provisions of this Part before lending to
any Government in the Federation. Lend-
ing by banks and financial institutions in
contravention of this Part shall be unlawful.
(Fiscal Responsibility Act, 2007, Section 45)
Thirdly, how does the ENSG propose to
circumvent the provisions of the FRA and
the DMO to get approval for these loans?
Moreover, the speed of approval by the
Enugu House of Assembly is noteworthy.
A loan request of this magnitude should
be rigorously vetted and analysed before a
decision is made. The legislative arm must
provide a buffer to avoid executive excesses.
I must also question the proposed use of a
portion of the loan for salary payments.
Beyond the breach of the provision in the FRA that the government at all tiers shall
only borrow for capital expenditure and
human development, it is a sad reality that
we have joined the League of States which
borrow to service recurrent expenditure.
With regards to the proposed “infrastruc-
tural developments”, they must be clearly
outlined and published along with the
cost-benefit analysis detailing the economic
and social benefits (FRA, 2007, 44). What
specific projects will be executed and in
what ways will these attract investments as
promised by the government?
These further buttress the reason our ac-
counts must be made public. This will give
citizens the tools to hold the government
accountable and give them the confidence
to support the government.
It is the business of every citizen to know
how much we have and how much we owe.
Again, I encourage the state to take a cue
from the action of the Central Bank of Ni-
geria, which took a bold step to publish its
audited accounts, giving Nigerians a clear
sense of our commitments to both internal
and external parties.
Another key area of concern is the repay-
ment plan as stated in the letter of request
signed by the Secretary to the State Govern-
ment, Professor Chidiebere Onyia.
The government stated that “The loan
will be repaid via Irrevocable Standing Pay-
ment Order (ISPO) on consolidated Enugu
State IGR accounts, which would be domi-
ciled in Fidelity Bank and domiciliation of
JAAC/FAAC/Infrastructure Support.”
This is a blatant encroachment on the
fiscal autonomy of the Local Government
which was one of the major challenges to
development under the previous adminis- tration. It is undemocratic and will not be
prudent of this present administration to
adopt the behaviour of its predecessors.