Oluseye Ojo, Ibadan
The past week in Oyo State has been tensed. Members of the public have been watching the unfolding drama. It has been a season of crossfire between the Peoples Democratic Party-led government and some opposition parties, especially the All Progressives Congress (APC).
The bone of contention is the N100billion prosperity bond approved on July 21, 2020, by the Executive Council of the state under Governor Seyi Makinde, to execute some projects.
Government
Insisted that the bond was approved after careful and holistic consideration of the infrastructural needs of the state to enhance its economic potential.
But the opposition parties arguedthat government wanted to mortgage the future of the state through by the borrowing.
The bond
The bond would facilitate the execution of priority projects such as construction of Ibadan Circular Ring Road, 50-kilometre Iseyin-Ogbomoso Road, Ibadan Airport upgrade, Ibadan Dry Port and development of rail corridor to serve as economic hub of the state.
Commissioner for Information, Culture and Tourism, Dr Wasiu Olatubosun, said the bond, tagged, “Oyo Prosperity Bond” would be raised in two tranches of N50billion each.
It is expected to cover facelifts for at least one government hospital in each of the three senatorial districts, as well as the 21-kilometre Airport – Ajia – New Ife Expressway with a spur to Amuloko in Ibadan that would also benefit from the alternative project funding approach of the state government:
“The state government has approved Oyo State Prosperity Bond to allow for quick completion of these iconic priority projects. The construction of Iseyin – Ogbomoso Road is very important because when completed, it will serve as a link road and help to save many hours spent on traveling and the lives of commuters, who daily experience vehicular accidents on various roads that link the already dilapidated Ogbomoso Road.”
He said the project funding would be in form of Alternative Project Funding Approach (APFA), which allows for Public-Private Partnership for funding of infrastructural projects: “With this approach in place, there will be transfer of projects’ risk to private entity while the hassle of debt management office (DMO) approval would be avoided and the quality delivery as well as quick completion of project would be ascertained.”
Opposition parties raise the alarm
The state Publicity Secretary of APC, Dr AbdulAzeez Olatunde, said: “Here is a governor who promised to take Oyo State finances away from relying on Federal Government monthly allocation within six-12 months of assumption of office. Forget the semantics. Oyo State is borrowing N100billion again. Honestly, in the business of governance, there is nothing bad in borrowing in as much there are commensurate projects that will fund the debts. How do we explain seeking N100billion bond when we are yet to see anything tangible to point to for the already accrued N39.5 billion debts?
“Oyo State Government’s decision seeking to finance projects in the magnitude of the Ibadan Circular Road by directly seeking for loan is laughable, misleading and undoubtedly shows signs of no foresight. Interestingly, there was a contractor in place as at May 29, 2019, when Makinde took over. The company has committed about N7billion to the Ibadan Circular Road Project. Why revoking the contract which is based on Public Private Partnership (PPP) Model, and government attempting to seek for loans to finance the same project?
If the government of Makinde eventually cornered the N100billion loan, the government would have successfully increased Oyo State debt profile by adding N139.5billion within two years.”
APC governorship in 2019, Chief Adebayo Adelabu, raised some posers: “What is the likely interest rate on the bond? What is the proposed tenure of the bond? What is the source of repayment of the bond? What is the regularity of interest servicing on the bond? What is the mode of principal repayment, instalment or bullet? What is the implication of a default on interest and principal? What are the financial returns on these projects, if any? Who are the parties (consultants) to the bond issue? What are their commissions? What are the other issuing expenses, and what is the net receivable on the bond after deducting the issuing expenses?
“Having asked these questions, it is quite easy to demonstrate the lack of capacity of the present financial status of Oyo State Government to fund projects using a commercial bond of this volume and magnitude. Servicing the interest alone is a major burden on the government finance before we start talking of principal repayment.
“There is no moratorium allowed on interest repayment on a bond issued. How will a government that is struggling to pay salaries alone, from the FAAC and IGR combined, meet this interest obligation. Meanwhile, our monthly combined revenue is already burdened by the interest and principal repayment obligations on the existing debts. Even if this bond is issued in two tranches as they mentioned, an interest of N500million will need to be paid on monthly basis on a single issue till the bond is redeemed.
Makinde hits back at critics
Chief Press Secretary (CPS) to Governor Makinde, Mr. Taiwo Adisa, said Adelabu’s analysis was pedestrian, advising him to rise above cheap politics. He stated that the terms that would be agreed to by the state on the bond would protect the interest of Oyo State people.
He noted that the Federal Government of Nigeria has made the issuance of bonds an integral part of its economic agenda: “If bonds are toxic, why did Adelabu not advise Nigeria and President Muhammadu Buhari? Why would he hide under unknown banners to make postulations that don’t edify the fact that he once sat at the boardrooms of the Central Bank of Nigeria? Certainly, the nation expects much more than this let down from Adelabu.
“We will like to state clearly that in coming to terms with the need to opt for the bond, Makinde is being guided by sound logic and scientific analyses that originate from unbiased quarters. For the avoidance of doubt, the 21-km Ajia-New Ife Express Road project with spur at Amuloko, being constructed under the Alternative Project Funding Approach (APFA), a Design, Build, Finance project, at a total cost of N8.5bn cannot be equated to the moribund and revoked Moniya-Iseyin Road project awarded under the administration of the late ex-governor Abiola Ajimobi.
“The Ajia-Airport project is a Public, Private, Partnership (PPP) project which will benefit from private funds. Rather, the investor has taken the risk of tying his funds to that project because of his firm belief in the economic recovery efforts of Makinde. The Ajia-Airport Road project is not only a well-thought out project, but one that will signpost the determination of the administration in institutionalising the culture of Public, Private Partnership as exemplified in the establishment of the high-riding Oyo State Investment and Public, Private Partnership Agency (OYSIPPPA), which is already recording huge successes in its pioneering deals.
“The failed N7 billion road contract awarded under the immediate past administration was never meant to be executed (as it was merely a job for the boys) targeted at raising funds for the 2019 elections. It unsurprisingly failed to really take off and Makinde was left with no other option than to revoke the contract, review, upgrade and eventually re-award it to a more competent contractor who is presently on site.
“It is also to be noted that the decision to turn around the corridors of Ibadan Dry Port, upgrade the Ibadan Airport and construct Iseyin/Ogbomoso Road, are clear measures targeted at expanding the economy in line with the administration’s four point service agenda.
“With improved facilities at the Ibadan Airport, Oyo State would certainly stand to benefit from the traffic and congestion challenges that are already the permanent feature of Lagos travels. Air travellers around the Western states would easily land in Ibadan, while international conferences can hold without the conferees struggling through the sea of traffic from Lagos Airport.
“We envisaged no fears of a possibility of debt overhang in this case, because the projects are bound to bring unquantifiable returns beyond mere arithmetic projections. The people of Oyo State are, however, reassured that their interests will never be circumvented in negotiating the terms of this bond. They are equally free to monitor every inch of the execution process in line with the policy of transparency and accountability of the Makinde-led administration.
“It is clearly preposterous for Adelabu, who prides himself as an economist, to jump into questions of tenor of the bond, when the process is only just kick starting. It is, indeed, an insult on the integrity of the Nigerian apex bank for any of its former top officials to be seen as speaking like a layman in monetary terms, rather than an expert whose opinions should stand the test of national and international financial debates.”
Support for bond
Aseyin of Iseyin, Oba Abd-Ganiy Adekunle Oloogunebi, said: “I am the happiest person on earth. When I got a call informing me about the State Executive Council’s decision on the Iseyin-Ogbomoso Road I looked up and thanked my ancestors. For those who do not know, this almost 44kilometers road holds an ancestral link with some notable family houses in Iseyin and Ilorin and most importantlyhas the best commercial prosperity one can think of.
“This governor is etching his name in gold. Iseyin people will never forget him for good. Look at what the state is doing on the Moniya-Iseyin Road that was almost jinxed. Traveling hour to Ibadan now is shorter and you will hardly see any vehicle broken down along the way; that is the consequence of good road.”
The monarch on critics: “They should rather sit with the governor and forge a better path to glory for our state, instead of fighting a performing government. He is like a good physician, struggling to save your life, and you are there claiming you are fighting him. Makinde has shown, with his actions since the inception of his administration, that he is cool, calculative and a listening governor.”
National President, Iseyin Development Union (IDU), Alhaji Bayo Raji; a leader of APC, who is an indigene of Iseyin, Alhaji Kazeem Olalekan; the Caretaker Chairman, Iseyin Local Government, Mufutau Abilawon, also saluted the courage of the governor for daring to take giant steps towards commercial development in the face of global economic crisis, occasioned by the COVID-19.
Olubadan of Ibadanland, Oba Saliu A detunji, who spoke through his Personal Assistant and Director of Public Affairs, Mr. Adeola Oloko, said the palace would not comment on political matters, more so that it has become controversial.
However, he said if the opposition could come up with a better idea on how to fund the priority projects mentioned by the government, the party should make it known. He added that the palace would also not stand against any project initiated by the government: “The palace will always support initiatives that will bring development to Ibadan land, Oyo State and Nigeria as a whole.