By ACHILLEUS-CHUD UCHEGBU

One of the strong arguments for the removal of the subsidy on petrol was that it would make more money available to the states for development. Indeed, some state governments have reported increased revenue from the federation account, including Value Added Tax (VAT). This has also slowed the rate at which governors borrow from commercial banks or bonds from the capital market. There is a lull in this trend. Rather than celebrate the rush to raise money from the capital market or to mortgage the future of states through loans, many state governors are now being rated on their ability to execute landmark projects without borrowing. Such governors are also, lauded for financial discipline. However, this cannot be said of Taraba State where opposition to plans by the state government to seek a N500 billion bond from the capital market has left tongues wagging.

The tongues wag becausee there are allegations that an initial N206.7b borrowed from commercial banks by the state government, with the close supervision of the Finance Commissioner, Sarah Enoch Adi, has not served the state well. For this, many people in Taraba are calling on their governor to convince them that the N206.7b, sourced from four commercial banks, served any developmental purpose before hitting the road for N500 billion said to be for the financing of the 202 budget. The budget size is N313 billion. They want him to point to what exactly he spent the N2006.7 billion borrowed from Zenith Bank (N83.3bn), UBA (N50bn), Fidelity Bank (N50bn), and Keystone Bank (N23.76bn). Security for this loan is tied to the state?s earnings from the Federation Account Allocation Committee (FAAC), Joint Account Allocation Committee (JAAC), Internally Generated Revenue (IGR) and Value Added Tax (VAT) as security.

However, there are indications that the state government abandoned negotiations with development finance institutions (DFIs), who were ready to finance projects in the state to settle for a bond. The DFI?s, including Afreximbank, the African Development Bank and the ECOWAS Bank for Investment and Development were contacted for project financing in Taraba state. Available information indicates that the DFIs are willing to finance projects in the state. Still, their funds must be tied to specific projects unlike commercial bank loans and bonds which are released directly to beneficiaries. This means that whatever funds they release to states, which are with single-digit interest options, must be tied to specific projects unlike those of commercial banks. The DFIs insist on project-tied financing to ensure transparency and accountability in the use of their funds. Commercial banks rarely care about these.

The state government had marketed an Integrated Rice Project, which consists of a 16-ton rice mill and 10,000 hectares of rice farm located in Wukari local government area; a solar and hydro energy project which would guarantee the generation of 50mw of energy from solar and 30mw from hydro for consumption in the state, and the creation of an industrial park designed to house five clusters -processing clusters, mineral beneficiation cluster, logistics cluster, residential and commercial housing cluster, and general industry cluster, to the DFIs. One of the DFIs was ready to inject some $82m into the rice project which would create about 1,000 jobs with the capacity to produce rice three times a year before it was abandoned in preference for a bond.

Those opposed to the N500b bond, say Taraba would fare better with the DFI offer, not the bond. For them, the DFI offer has a ten-year tenor with an initial two-year moratorium on a single-digit interest rate, unlike the bond. The opposition argues that having already mortgaged the state?s earnings from FAAC, JAAC, VAT and IGR for the N200bn loan, the state would be asphyxiated in repaying the N500b. This implies that the Taraba people, who would need to look elsewhere to raise money to fund their state, are already holding the short end of the stick. For them, the DFI option works better as the projects would pay for themselves overtime as well as impact more positively on their lives.

This situation has already raised questions about the lack of progress in the state despite the belief that the incumbent administration would radically transform the state and uplift the lives of the people. There are cries from civil servants that public service is gradually grinding to a halt due to a lack of financing for services. Though Emmanuel Bello, a Senior Special Assistant on Media to the governor, had told an online medium that claims that the state was haemorrhaging were untrue, adding that ?our IGR has improved considerably due to the hard work of the sagacious governor and his team,? and that ?this is the year of infrastructural development in roads and bridges,? the opposition insists that the government has nothing tangible to show as outcome of the peoples investment of their political will in the government.

According to the Debt Management Office (DMO), the domestic debt profile of the state as of December 31, 2021 was N81.3 billion. This has come down to about N33 billion as of March 2022. Its external debt as of 2023 was put at 21.92 million dollars. It has a poverty rate of 87.72 percent making it the second poorest state in Nigeria. According to analysis, the state?s poverty rate is largely due to heavy reliance on undeveloped agricultural potential, underdeveloped infrastructure and insecurity. Access to education and healthcare are also low and some analysts hold the poor implementation of government policies and programmes responsible for this. These are areas of crucial need which the people expect the injection of the N206.7 billion borrowed from a consortium of banks, would have positively impacted. There is an argument that a DFI project-financing option would boost agricultural production and move the state away from subsistence farming as well as create a value chain that would improve the cultivation of tea and coffee which the state is noted for.

These are part of the reasons that those opposed to Gov. Kefas? leadership style, and decisions, are worried that Taraba is losing out on opportunities for growth and development and rather walking into more debt, in a state in which the immediate past leader is being prosecuted by the Economic and Financial Crimes Commission (EFCC) for allegedly embezzling N27 billion belonging to the state during his eight-year rule.

However, what is now left to the imagination is how a budget of N431.3 billion would be financed by a bond of N500 billion which, according to State Executive Council approval, would be released to the state at N20 billion per annum. The approval reads: ??to finance the 2025 budget, the state needs to collect N500 billion bonds from a financial institution.? How?

?Achilleus-Chud Uchegbu is Editor, The Union Newspapers, Ikeja, Lagos.

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