Nigeria's Senate has approved a request by 14 states and the Federal Government to borrow $1.137 billion from the Islamic Development Bank (IDB), the International Development Association (IDA), French Development Agency (FDA) and Indian Line of Credit. The loans are in line with NigeriaÃ¢€™s external borrowing guidelines and are meant for economic and power reforms, rural development, special intervention for infrastructural development in some states and social programme development in others.
The loans and credits are to be secured on concessionary terms with 25 to 40 year repayment periods and 7 to 10 year moratoriums.
The approval was based on the the recommendation of the Senate Joint Committee on Finance, and National Planning, Economic Affairs and Poverty Alleviation which appraised the loan requests in the final batch of the 2010 external borrowing plan.
The Federal GovernmentÃ¢€™s initial request of $152.2 million was slashed by $200,000 and Lagos, Abia, Oyo, Imo, Taraba, Plateau, Osun, Adamawa, Edo, Kebbi, Niger, and Ondo states received the full amount of their requests while Cross River and Enugu states only received approval for partial amounts due to discrepancies between their requested figures and figures approved by the Federal Ministry of Finance.
Ogun, Kaduna and Kano had their request rejected. The chairman of the committee, Senator Ahmed Makarfi, said that Kaduna state was denied approval because of its pending negotiations with lending agencies. Ogun state was rejected due to discrepancies between its requested loan amount and amounts approved by the Federal Ministry of Finance. Kano StateÃ¢€™s request was rejected because the state did not show up at the National Assembly to defend its request.
The loan amounts are:
- $152 million loan from the Africa Development Bank (ADB) was approved for the Federal Government's power/energy project
- $333.8 million loan for Lagos StateÃ¢€™s budget support, urban transport and water sector reform projects.
- $68 million loan for Oyo State's urban water and sanitation project.
- $60 million loan for Niger State
- $15 million loan for Taraba State's water supply
- $60 million loan for Imo State's rural access mobility project
- $50 million loan for Kebbi State's special intervention for infrastructural development project
- $50 million loan for Edo StateÃ¢€™s special intervention for infrastructural development project
- $100 million loan for Enugu StateÃ¢€™s rural access and mobility and power/energy projects
- $50 million loan for growth enterprise and market in states and power/energy project
- $200 million loan for Abia State
- $50 million loan for Adamawa State
- $50 million loan for Ondo State
- $50 million loan for Plateau State.
- $60 million for Osun State's rural access and mobility project II.
Senator Makarfi said the approved borrowings have met the new external borrowing guidelines and Ã¢€œ "The projects to be funded with the proceeds are desirable and will improve the state of infrastructure of benefiting states if properly applied. They all have more than 35 per cent concession as required by the borrowing guidelines. This is a total departure from the previous external debt pattern, when Nigeria was borrowing under severe and unfavourable terms and condition from the international capital market".
"About 75 per cent of the loans attract an interest rate of 0.7 per cent per annum, while the remaining 25 per cent attract an interest charge not exceeding 2 per cent per annum. The loans and credits would be secured on concessionary terms with repayment periods of 25 to 40 years and moratorium of 7 to 10 years."
"The views and opinions expressed in these comment(s) or article(s) do not necessarily reflect the views or opinions of NGEX, its partners or its affiliates."
OBJ HOUSTON, TEXAS, USA February 24, 2011
The reasons stated for these loans and some without reason per this article does not make any economic sense. How much revenue has any of these states generated on their own? You cannot borrow from foreign institutions for the purpose of making up your budget deficits. All states must generate 50-70% of their financial needs internally and not depend on oil revenue or borrowing from foreign institutions. This is the primary reason the development of the nation has been dwarfed over the years, because we have leaders without iota of knowledge on how to generate revenue. Ask any of these borrowing states how they plan to repay for this, and undoubtedly the response will be oil revenue. It is time we stopped putting people in office simply because they are PDP members. We need leaders that know how to create wealth or have created wealth, and not the ones with the inclination to steal. This loan is just another wasted fund in the name of false hope to the citizens of the respective states.
LetÃ¢€™s take Abia State as an example; it is the worst state in the nation and the kidnapping issues there is well publicized. The roads, security, schools, and all public infrastructures are dilapidated. Based on this, can you candidly tell me what problem the $200 million dollars will solve? The problems there cannot be solved with $200 billion. I am honestly cogitating that this fund is designated by PDP to convince these governors to maintain status quo for PDP. It is an absolute misuse of public fund as nothing concrete will be done with this fund. How much has the Federal government spent in the past eight years in the name of power generation? A company in US can produce more power in three years more than the nation of Nigeria has not been able to produce since independence. The leaders of the nation need not forget that Nigeria is not absorbed of the revolution in North Africa and Middle East.
I would like all the borrowers to tell the nation in 6-12 months what specifically the fund was used for, the economic impact, and how many jobs the funds assisted in creating. It is time for accountability, and the looting of public fund must stop.