Policy Alert has called on Nigeria’s Fiscal Responsibility Commission (FRC) to investigate what it calls spurious loans obtained by Akwa Ibom State government.
The Civil Society Organisation, promoting economic and ecological justice in the Niger Delta, claims that the loans “were obtained without due process and in breach of the Fiscal Responsibility Act 2007 and the Akwa Ibom State Fiscal Responsibility Law 2020.”
Section 2(1b) of the Fiscal Responsibility Act (2007), stipulates that the Commission shall have powers to cause an investigation into whether any person has violated any provision of the Act.
The call comes on the heels of the approval by Akwa Ibom State House of Assembly, last Monday, of the Governor’s request to access a N150 billion “financial instrument” either through “promissory note discounting” or “direct credit substitute.”
Read also: N150 billion loan facility: AKHA members’ Contributions
In a statement Wednesday and signed by its Programme Officer, Fiscal Reforms and Anti-Corruption, Faith Paulinus, the organization observed that “the proposed N150 billion facility would be the latest in a string of spurious loans that have been acquired by the state government in recent times.”
The statement read: “Contrary to what the State Governor, the Finance Commissioner, and the legislature would have us believe by their strange denials, Policy Alert insists that the facility, by whatever name called, amounts to a loan. In the last 12 months, several loan requests have been approved by the state legislature in a hasty, irregular, and illegal manner, without due process, and in contravention of extant laws. The collusion of both arms of government to impose an unsustainable debt burden on the state is highly deplorable.
“Data from the Debt Management Office, Abuja shows that as of September 30, 2021, Akwa Ibom State’s domestic debt stock stood at N234.85 billion. That makes it the most indebted state in Nigeria in per capita terms. This portends disaster for fiscal space and development prospects of the state in the years to come.”
The statement continued: “Both the federal and state fiscal responsibility laws have provisions that mandate state governments intending to borrow to present through the legislature to the public a cost-benefit analysis, detailing the economic and social benefits of the intended borrowing, and clearly demonstrating that the loan will not push the government into an unsustainable debt situation and will be spent on self-liquidating capital projects. What we are seeing playing out in Akwa Ibom State is the reverse of this legal requirement”
Straightnews recalled that in November 2021, Policy Alert publicised information that the Akwa Ibom State government had drawn down N171.2 billion and N12.18 billion under the heading of “13 percent derivation revenue arrears” in the third and fourth quarters of 2021 respectively.
The organization specifically associated the stated arrears with the recalculated oil derivation revenue arising from a court judgment in favour of four Niger Delta states in which Akwa Ibom State stands to receive about US$2.258 billion or N926.9 billion.
Suspecting that the income may have been a facility from a commercial bank on the basis of the court judgment, Policy Alert subsequently issued a statement advising state governments in the Niger Delta to avoid the temptation to use the 13 percent derivation judgment as a guarantee for loans.
“The recent loan request has validated our position that the state government may have been secretly and illegally obtaining commercial bank facilities on the basis of that court judgment,” Policy Alert said in its statement.
It also decried the state government’s spending on interest payments for these loans, noting that the sudden spike in interest payments for 2021 indicates an irregularity in the state’s debt servicing regime.
“The public debt servicing pattern of the State in the last seven years gives reason for serious suspicion and concern. The average spending for debt servicing in the six years preceding 2021 was N24.4 billion. This suddenly shot up to N67.77 billion in 2021 as published by the Akwa Ibom State Government in its full year budget implementation report for 2021, which indicates that there may have been unusual transaction costs to these recent loan acquisitions.”
Policy Alert, therefore, asked the Fiscal Responsibility Commission to launch an investigation into the loan approval processes of the financial institutions involved as they may have failed to request and obtain proof of compliance with the laid down conditions for borrowing in accordance with extant laws.
“We find the acquiescence of the Akwa Ibom State House of Assembly on the recent loan requests highly disappointing and deem it a generational betrayal.
“We are particularly disturbed that this latest loan request is coming barely weeks after the governor made public his succession plan, giving the impression that these funds may end up being used to prosecute his 2023 political agenda. It is not just suspect but odious whichever way you look at it, and must be resisted by all right-thinking citizens,” the statement added.
