Amosun and the Bailout Funds

Prudence is the mother of all virtues. It also refers to the exercise of good judgment, informed by intelligence and good character. Prudence requires the consideration of long term choices and implications of decisions, and the avoidance of biases that make us focus on instant gratification. Judging from this premise, one can then logically come to the conclusion that no other word can better describe the decision of the Ogun State Governor, Senator Ibikunle Amosun, to opt for a 10-year repayment schedule for the bailout fund provided to states of the federation by the federal government.

Whereas the federal government had offered to the states a 20-year repayment schedule, Senator Amosun, a chartered accountant and prudent manager of resources, chose to repay the bailout fund in 10 years. That decision placed Ogun State in a class of its own. Ogun State is the only state in the federation to choose that path. If Ogun State had played along with the 20-year repayment plan, the current monthly deductions from its allocations would have been reduced by an amount in excess of N400m.

But that would have been a short-sighted decision. Governor Amosun, being prudent, knew that what was required of him is a consideration of long term choices in a manner that avoid biases that often make the average person to focus on short term rewards while ignoring the long term implications.

So by choosing a 10-year repayment plan, the governor is in the long run saving the good people of Ogun State over N80bn in debt service costs that would have been incurred over the period of the loan.

He is in fact not stopping there. The governor is also working very hard to ensure that he saves more for Ogun State by exercising the option of making lump sum repayments of the principal whenever the state has the capacity to do so. By so doing, Governor Amosun intends to fully repay the bailout loan before the end of his tenure of office.

“We don’t intend to leave any debt to the administration that will succeed us. Despite the apparent squeeze that this incremental repayment places on our finances in the short term, we think it is the best decision for the people of Ogun State to have a much lower cost of debt overall, allowing financial resources to instead be directed towards the further development of our State,” the governor said.

So, where is this confidence coming from in an era where resources are dwindling and some have started calling for a reduction of the national minimum wage?

Well, the answer again, lies in the meaning of the word prudence. “We took this decision because we are confident that the efforts we have made to date to diversify our revenue sources and strengthen our IGR base will continue to bear fruit as we proceed through our second term.

“Indeed it is the fruit of these efforts that has enabled Ogun State to continue to pay salaries and pensions as and when due, despite the notable reduction of funds from the Federation Account,” Governor Amosun said. This also explains why the Ogun State Governor was able to pay the December, 2015 salaries of all civil servants in Ogun State before Christmas Day and also paid 10 per cent bonus.

The Senator Amosun-led administration has repeatedly made it clear that it is not considering a reduction of the minimum wage or staff retrenchment as a result of the dwindling federal allocation.