Friday, September 30, 2022

Proposed N100 Billion Loan: See Soludo Explanation 

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Anambra State Governor, Prof. Chukwuma Soludo yesterday, through his commissioners, offered explanations on the government’s proposal to the House of Assembly, for approval to borrow the sum of N100 billion. Questions surrounding this loan have been a major issue of debate in Anambra civic spaces. In a meeting with the House Committee on Public Accounts, Commissioner for Budget and Economic Planning, Chiamaka Nnake, and Commissioner for Finance, Ifeatu Onejeme, explained that certain realities and considerations informed the government’s decision to borrow N100 billion which will be injected into the state’s need for infrastructure.

Making reference to Prof. Soludo’s manifesto, Onejeme averred that in fact, given the infrastructure demand in Anambra State, the state actually is in need of between N200 and N250 billion per annum, to be able to meet up with the infrastructure gap in the state.

During the meeting, the Chairman of the House Committee on Public Accounts, Hon. Somto Udeze inquired to know how much of the N100 billion will be spent for 2022. In his response, Commissioner for Finance, Ifeatu Onejeme said that it is based on the approved budget. “It is based on the appropriation law, which deficit is N42 billion.”

On his part, Hon. Nonso Okafor inquired to know if the N42 billion deficit in the budget is included in the N100 billion, considering that the Commissioner for Budget, Chiamaka Nnake had said that the government needs more money. Again, Onejeme answered in the affirmative, buttressing that based on the needs of the state, there is a need for more money but for this year, the maximum amount that will be extracted from the loan when approved and secured, will be N42 billion, based on the appropriation law.

Over the years, budget performance in Anambra State has usually been less than 50%. The reason, Onejeme explained, is that the state has limited funds. “The reason budget performance is low in the previous administration is that the funds available to the state is limited”, Onejeme said.

On contending issues regarding the loan such as the duration of repayment, the commissioner said it’s between 7 and 10 years. He further explained that if the state takes N120 billion, then, repayment will be a monthly deduction of N1.571 billion. Hon. Nnamdi Okafor then insisted to know the repayment deduction for the N42 billion that is meant for this year which Onejeme calculated and said it is N532 million.

The governor had proposed to borrow from either the CBN or commercial banks, designated options A and B in his letter to the House, earlier. Ifeatu Onejeme then explained that if the state is able to get the CBN loan, it is much better because the interest from now till February of 2023 will be 5% and thereafter 9%. This contrasts sharply with the B option in which the interest rate might be up to 17% or 18%, the commissioner observed.

Addressing concerns over borrowing more than the state needs for the year and then running the risk of paying interest for money kept for future unknown use, Onejeme clarified that any interest on the loan facility is based on a drawdown. According to him, “the interest on the loan is at the point of disbursement”. That is to say that when the loan is secured and placed on a loan account, it is free of interest until it is taken by the state from the loan account for use. And the interest is also charged on the amount taken and used, not on the whole amount secured. This he said is obtainable in both options.

Shading more light on the IGR status of the state, Onejeme said that if the IGR performs better, then, the state might not need up to N42 billion for the 2022 fiscal year. “We have other funding sources and might not need up to N42 billion if our IGR picks up”, he said. Hon. Uzoma Eli then inquired to know about other specific projects attached to the loan. Hon. Noble Igwe, and Hon. Somto Udeze, then asked that the road projects be specifically identified. To this, Ifeatu Onejeme informed the members that Governor Soludo has directed the Commissioner for Works to identify all the roads that are up for construction and attach their cost implications, among others.

The Committee also inquired to know Anambra’s current debt status which the Commissioner said is around N109 billion and will be N209 billion if the 100 billion loan is taken. The commissioner also informed the committee that the Amanse­ to Ufuma road has been re-awarded and approved in the last exco meeting and that the road is designed to last for 30 years, in line with the governor’s commitment to construct roads that have a lifespan of not less than 20 or 30 years.

Somewhat satisfied with the explanations given by the commissioners, the House seeing that option A is more beneficial, asked what it might take for the state to secure the loan based on option A, insisting that they are clarified on option A, but not so with the option B. To this, the commissioner said that option B is necessary should A fail, Hon. Pete Ibida agreed with the commissioner on this.

The committee rounded up its hours-long interface with the two commissioners and finally demanded that they provide specific projects the loan is meant to finance, project objectives and justification, cost of each project, impact on Ndi Anambra, and expected duration for project completion, and anticipated problem.

With this development, many of the questions and concerns regarding the governor’s proposed N100 loan have been significantly addressed. Once the government provides further details on proposed road projects and other infrastructure, then, all genuine concerns about the loan would have been duly addressed.

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