A Civil Society Organisation in Akwa Ibom State, Policy Alert has raised the alarm over the state government high rate of borrowing and increased debt profile which according to the group could plunge the state into a state of unsustainable loan repayment.
It noted that the state government’s latest decision to acquire a fresh N7billion loan was irrational and ill advised when the domestic debt profile of the state as of March 2021 already stands at N232billion placing the state as the third highest in debt burden among the 36 states of the federation and Federal Capital Territory.
It could be recalled that the State House of Assembly recently gave Governor Udom Emmanuel the approval to borrow N2 billion for Agriculture and N5 billion for Housing totaling N7 billion.
But, Communications and Stakeholder Engagement Officer of Policy Alert, Mrs. Nneka Luke-Ndumere, in a statement on Tuesday, said such approval was an evidence of the State government’s decision to engage in loan acquisition spree despite its aggravating debt situation which placed the State on the pedestal towards unsustainable debt profile.
She noted that the latest N7billion loan approval for the government is a breach of the Akwa Ibom State Fiscal Responsibility Law 2021, stressing that the State failed to provide cost benefit analysis in the recent loan approval.
CBN explains why Nigeria can’t stop borrowing
According to her, “The Fiscal Responsibility Law, which should guide the State in matters like this provides that the State Government shall not only specify the purpose for which every borrowing is intended but must also expressly and convincingly present a cost-benefit analysis detailing the economic and social benefits of the purpose to which the intended borrowing is to be applied.
“The state government failed in its fiscal responsibility by not providing these prerequisites for loan acquisition and the House of Assembly on its part failed in its responsibility by approving the loan request without interrogating it against the provisions of a law it made recently.
“We must understand that there is a very questionable trend of loan acquisition in the State which makes the debt profile of the State very close to unsustainability because these loans are not self-liquidating. Instead, the state pays hugely for interest on these loans.
“Do not forget that the State in 2019 which was an election year acquired loans to the tune of N48 billion and in 2020 acquired N7.8 billion. Now, in just half part of the year, N7 billion has been approved for acquisition. You can now predict the expected trend before the end of the fiscal year. We cannot continue with this trend of frivolous loan acquisitions.”
She added: “According to the Accountant General’s report and Audited Financial Statements for 2019, the State spent a whopping N12.2 billion on payment of interest on loans. As of January 1, 2019, the state’s outstanding loans stood at just N93 billion, but the debt stock has now risen to N232 billion excluding the N7 billion approved last week. Imagine the enormous social opportunity cost of future loan repayments.
“In 2020, the state spent N25.2 billion on loan repayments, with over 40 percent of that amount spent on servicing interest rates on internal loans. It is alarming to imagine the lives that could have been touched by billions of naira wastefully spent in this way over the years and the possible uses of the money that will be spent servicing future loans as the state’s debt continues to rise.”
You’re president to protect Nigerians, not just borrowing money – Wike mocks Buhari