ENSG’s N170bn loan: A demand for fiscal responsibility
By Frank Nweke II
With an alarming internal and external debt profile of approximately N183 Billion, it is baffling to see the Enugu State government attempt to borrow an additional N170 Billion.
In effect, this administration seeks to open its loan portfolio with an 182.79 percent increase above the N93 Billion domestic debt accumulated over the eight years of the Ifeanyi Ugwanyi administration. It is also interesting to note that the loan amount exceeds the 2023 total budget presented in December 2022.
This will take our State above the stipulated borrowing limit by the Debt Management Office by 226 percent and will place Enugu State as the 4th most indebted State in the country.
In the past year, I have spoken extensively about the poor fiscal conditions of the state and the need for drastic cost-cutting measures and strategic prioritisation to pull us out of the economic morass that the previous government had plunged us into. The Ugwanyi administration closed with a domestic debt of N93,197,207,627.52 and an external debt of $120,667,083.51. The prospect of further increasing our debt profile is not in the best interest of our economy.
At present, Enugu State’s debt per capita ratio, which represents how much debt the government owes on behalf of each citizen, stands at N23,907. This additional N170 Billion will double and triple our debt per capita ratio over the next year. This means that the government will owe an estimated N67,500 on behalf of each citizen, which is a far cry from the zero per cent poverty headcount index promised by this administration. To put this in perspective, the state spent N3,506.84 per capita on education and N1,559.1 per capita on health in 2022. Enugu is currently the 10th poorest state in Nigeria and the second poorest in the Southeast with a poverty rate of 58.13 percent behind Ebonyi State.
The stagnant economic situation in the past decade begs the question of what the previous debts incurred were spent on. Roads, hospitals, and schools are in deplorable states. Teachers’ salaries and pensions remained unpaid for several months despite the huge sums quoted through the years.
While I am not against borrowing for development purposes, it should be consistent with the Open Governance Partnership requirements for transparency and accountability, per the provisions of the Debt Management Office for fiscal responsibility, and with the citizens apprised of the purposes of these facilities.
This recent development raises several concerns.
According to the provisions of the Debt Management Office, for Domestic Capital Market borrowing, States and FCT are to ensure that their total amount of loans outstanding at any particular time, including the proposed loan shall not exceed fifty (50) per cent of the actual Total Revenue for the preceding year. (Investment and Security Act, 2007, Part XV, 223 (1b) quoted in the provisions of the DMO).
With Enugu’s reported actual total revenue for 2022 being N128 Billion, the acquisition of a domestic debt of 170 Billion which takes our total debt profile up to approximately N354 Billion will exceed the stipulated limit by 226 percent. (I must make a side note about the herculean task of downloading the quarterly performance reports from which the total revenue for 2022 was extracted, as it is unavailable anywhere else)
The Act also provides that “The DMO shall conduct a Debt Sustainability Analysis to ascertain that the Monthly Debt Service deduction of the State or FCT, including the servicing of the proposed bank loan being contemplated, does not exceed 40% of the Total Monthly Revenue (FAAC and IGR) of the State or FCT for the preceding 12 months, and make a recommendation to the Minister as appropriate.”
First, the government is in breach of the law and intentionally jeopardising the economic health of the state and ultimately, the welfare of the people. Concerning the stated percentage allowed for debt servicing, what is the viability of maintaining a monthly debt service deduction below 40 percent of our revenue when the State’s total liabilities are consolidated? If it technically falls below the threshold, how will this reflect on the economy in real terms? Unfortunately, the figures and terms of our indebtedness are not readily available for public evaluation. The government must shun the practice of opacity in managing the state’s accounts and embrace transparency.
Secondly, the financial institutions offering these facilities will also be acting in breach of the law and liable to sanctions as provided. Have Fidelity Bank and Globus Bank calculated the costs?
All banks and financial institutions shall request and obtain proof of compliance with the provisions of this Part before lending to any Government in the Federation. Lending by banks and financial institutions in contravention of this Part shall be unlawful. (Fiscal Responsibility Act, 2007, Section 45).
Thirdly, how does the ENSG propose to circumvent the provisions of the FRA and the DMO to get approval for these loans?
Moreover, the speed of approval by the Enugu House of Assembly is noteworthy. A loan request of this magnitude should be rigorously vetted and analysed before a decision is made. The legislative arm must provide a buffer to avoid executive excesses.
I must also question the proposed use of a portion of the loan for salary payments. Beyond the breach of the provision in the FRA that the government at all tiers shall only borrow for capital expenditure and human development, it is a sad reality that we have joined the League of States which borrow to service recurrent expenditure.
With regards to the proposed “infrastructural developments,” they must be clearly outlined and published along with the cost-benefit analysis detailing the economic and social benefits (FRA, 2007, 44). What specific projects will be executed and in what ways will these attract investments as promised by the government?
These further buttress the reason our accounts must be made public. This will give citizens the tools to hold the government accountable and give them the confidence to support the government.
It is the business of every citizen to know how much we have and how much we owe. Again, I encourage the state to take a cue from the action of the Central Bank of Nigeria, which took a bold step to publish its audited accounts, giving Nigerians a clear sense of our commitments to both internal and external parties.
Another key area of concern is the repayment plan as stated in the letter of request signed by the Secretary to the State Government, Professor Chidiebere Onyia. The government stated that “The loan will be repaid via Irrevocable Standing Payment Order (ISPO) on consolidated Enugu State IGR accounts, which would be domiciled in Fidelity Bank and domiciliation of JAAC/FAAC/Infrastructure Support.”
This is a blatant encroachment on the fiscal autonomy of the Local Government which was one of the major challenges to development under the previous administration. It is undemocratic and will not be prudent of this present administration to adopt the behaviour of its predecessors.
Additionally, the sustainability of these debts and the proposed repayment plans are questionable considering our current revenue and liabilities. What is the plan to astronomically grow the IGR without placing a heavier tax burden on the already depleted pockets of citizens?
Finally, and most importantly, is the question of transparency and accountability. We need to see a detailed plan for expenditure, and stringent measures for monitoring and evaluation of the proposed projects.
On September 4, 2023, I noted that no further discussion had been raised concerning the 2023 budget after the previous administration’s presentation in December 2022. Neither had the federal allocations to the State been made public, even though an estimated N21 Billion had been disbursed to the State’s coffers from the Federal Allocations Accounts Committee (FAAC) at the time.
This situation remains the same today and we also do not know our Internally Generated Revenue since the new government was sworn-in in May. While the House of Assembly reportedly approved a N58 Billion supplementary budget, the document is not available for the public to review, nor has any clear plan been communicated for which these humongous borrowings are being effected.
We must elevate the place of accountability in our governance. Every sitting government in Enugu State must commit to providing information and ensuring transparency in managing the state’s account. Appropriate mechanisms must also be emplaced in place to track the deployment of these resources.
Enugu State faces the heightened risk of economic meltdown if fiscal responsibility, transparency, and accountability are not prioritised.
As a citizen of this state, I demand that the government respond to these concerns and reevaluate the management of the State’s accounts.
The sun will rise again. Our glory will be restored. Our state will be rebuilt.
May we live to see the reigniting of the coal city. God bless you. God bless Enugu State.
