By Solomon Adeniyi
There has been confusion over a report by the Fiscal Responsibility Commission, FRC disclosing that the South west states at the end of 2016 owed debts well in excess of 50 per cent of their annual revenues.
The report placed Osun state second among states with the highest debt to gross revenue with 539.25 per cent.
Not surprisingly, this has raised a firestorm in the state of Osun, as the governorship election is 176 days away.
In reaction, Mr Sola Fasure, the Media Adviser to Governor Rauf Aregbesola described as meaningless the debt revenue ratio by the FRC, saying debt profile should be compared to the total worth and not income as presented by the FRC.
He added: “The loan should be examined in relation with the purpose it was meant to serve. Let’s say you want to take a mortgage to build a house and your income is N50,000 in a month, does it mean you will ask for N100,000 ? You will ask for at least N1m which is barely enough to build a two bedroom apartment which is 2000 per cent of your income’’
Fasure noted that these loans were used for human and infrastructure developments and are therefore commendable investment for future.
Justifying the borrowing, the Administrative Manager of the state branch of the Charted Institute of Bankers of Nigeria, CIBN, Yinka Anjous described the debt of the state as needful and a reproductive one needed to put the state on a development path.
He said: “In public finance, once there is deficit in the money generated, a state must borrow. Also, when ends are many and means are few, the difference between the two will be borrowing. Whether a state likes it or not it must borrow if it wants to achieve its set goals. In Nigeria, if a state claims it is not in debt, it has done nothing. Also, if a state claims it is prosecuting projects without borrowing, such a state is being economical with the truth. What you borrow on will determine if it is needful or not.”
“We can all see that Osun has borrowed for productive purposes which are seen in the bridges and motorable roads they are constructing among others which are meant to give us return on investment in the future. It is reproductive because whether we like it or not, the good roads, stable electricity, schools, and hospitals among others will recoup. Also, it is an anticipatory revenue.
“The state has been embarking on federal government projects which is also of robust importance to the state, whether the FG likes it or not, it must pay back the state, the people of the state can be rest assured that the debt would be paid back. These are not the kind of debt that can’t be paid. The state has once found itself enmeshed in this before Aregbesola took over the mantle of leadership. He had to repurchase the loan”.
Anjous noted that the infrastructural development borrowed for, were sacrosanct with the situation on ground as the roads, electricity, hospitals, water, among others would attract potential investors to the state, assuring the people of the state that the physical infrastructure will definitely pay itself off.
On the need for moratorium or renegotiation of the debt, he said: “There should be both moratorium and renegotiation. A state should be wary of where it gets its money from. The borrowing must be well negotiated to the extent that it will be given moratorium as well as a room for renegotiation in case the need arises. I want to advise the government to approach institutions with zero interest rate such as the Islamic bank for bonds, as interest kills borrowing”.
He lauded the governor for the bold step, adding that the debt owed was to the advantage of successive administrations.