The recent revelation of the amounts of new debts contracted by various state governments has, expectedly, generated rebuttals. Many governors of the states mentioned have tried to extricate themselves from the reports. This will not arise if borrowings by the states are being adhered to, and indeed Nigerians see what the money is used for.
Nigerians are not criminalising borrowing, whether local or foreign. What they frown at seriously is irresponsible borrowing, which impoverishes the state instead of helping the borrowing entity to improve the lot of its citizens. The debt market plays a pivotal role in developing the economies at all levels. Debts will always have key advantages in helping an organisation or government overcome the limitations imposed on them by financial constraints. However, the debt market is highly regulated and calls for discipline.
State governors, as the Chief Executive Officers of these political jurisdictions, must be careful with loans they take. They must play by the extant rules that govern the borrowers’ application, approval, and utilisation of loans.
In 2020, the Debt Management Office issued a revised version of its guides for application for loans, both foreign and domestic, by the federal and state governments as well as the FCT. In the case of the state, the guide asks whether the loan proposal to be submitted to the minister includes the purpose of the loan and its link to the developmental agenda of the state government. It also asks whether the proposal includes a cost-benefit analysis, with the details of how the loan will be utilised, and its economic and social benefits.
Applying for, negotiating the terms of all loans, and the identification of the projects on which the proceeds would be applied must follow due process. At all stages of these processes, the governors and their lieutenants must be transparent, including all terms attached to such loans. Cases of hidden terms of loans emerging long after the loan contracts have been signed and the loans taken must not be entertained anymore.
Every economic activity undertaken by a government must necessarily be on behalf of the people and should be designed to advance the general well-being of the people. It is, therefore, imperative that all such projects, the sources of funding, and the cost, must be fully disclosed. Ultimately, the people of the states bear the costs of these projects through the taxes they pay.
The governments must avoid the idea of taking loans to execute white elephant projects. It is a waste of the state’s resources to embark on grotesque projects that do not add any value to the people of the states concerned.
In this regard, Daily Trust calls on the states’ Houses of Assembly to rise up to their constitutional responsibility of providing oversight functions on the activities of the Executive. As provided in the DMO guidelines on borrowing by the states, these assemblies should up their game by checkmating the governors. They must be carried along by the governors in all processes dealing with loan proposals, up to the point of the final signatures. They have the power to block any loan proposal that they are not convinced will be in the overall interest of their states. The federal government should also assist, especially where it involves old loans.
The impetus for the recourse to loans by the subnational governments has always come from the general paucity of funds available to them. Now, that narrative is changing. The monthly allocations from the FAAC are rising, due to the petroleum subsidy removal. For instance, in 2023, the FAAC allocations to the three tiers of government rose to N10.143 trillion, a 23.56% increase over theN8.209 trillion disbursed in the year before, according to the Nigerian Extractive Industries Transparency Initiative. There are also projections that this year’s allocations will be higher than last year’s. Therefore, Nigerians would like to see what their governors are spending the money on before the states even consider taking loans. All these call for strict observance of fiscal responsibility rules at the state level.
Also, governors should improve on internally generated revenue and the money should be accounted for. The experience in the past had been a gross display of poor managerial spirit by governors, who displayed an embarrassing lack of entrepreneurial attributes. Unfortunately, many of our governors and their finance commissioners would rather go for loans than initiate programmes to raise revenues from internal economic activities in their states. The result has been a perpetual dependence on the monthly Federal Revenue Allocation and in its absence the recourse to borrowing.
Our governors must know they are in office to improve the lives of the people of their states. They have sworn to cater to the welfare of the people they govern. Therefore, those who present themselves to be elected into the office of governor must be prepared to make positive impacts on their citizens. And the truth is that no meaningful impact can come from a state governor who approaches his job with a laid-back attitude or indiscriminate borrowing.
