BORROWING (2): THE STATE GOVERNMENT

The states should cut down on costs of governance

At a period the debt profile of the 36 states, according to BudgIT, has increased from N3.03 trillion in 2015 to N3.89 trillion in 2017, the governors are considering floating bonds in the capital market. This proposal, according to the chairman of the Nigeria Governors’ Forum, Abdulaziz Yari of Zamfara State, was as a result of the serious financial crisis facing several of the states. While sourcing funds through the capital market is the cheapest way for states to raise the needed finances to augment what they get from the federation account in order to be able to carry out infrastructural projects, we are nonetheless worried about the repayment of such loans.

We need to state from the outset that we have nothing against states borrowing through the capital market as this is the standard practice world over. If the aim is to help the states bridge the gap between what they receive from the federation account and their developmental needs in the areas of infrastructure, health, education, power and transportation, it is a laudable idea. But it is one thing to raise these funds and quite another to ensure accountability and its judicious application. That precisely is where the problem lies.

Without the requisite oversight by their respective state legislature, there are fears that some states’ chief executives may simply pocket a large chunk of these funds. There is also a possibility that some governors who are approaching the end of their tenure could incur and leave behind heavy debts for their successors. In fact, many of the current governors on assumption of office complained of inheriting heavily indebted states on account of funds taken from the capital market

ALL RELEVANT AUTHORITIES SHOULD PUT IN PLACE THE NECESSARY MECHANISM TO ENSURE THAT THE STATES DO NOT MORTGAGE THEIR FUTURE ON THE PRETEXT OF BORROWING FROM THE CAPITAL MARKET