There is unease in Kogi State over moves by Governor Yahaya Bello’s administration to raise a $500 million foreign loan for debt consolidation and execution of some infrastructural projects.
The details of the projects were still sketchy last night.
It was learnt that the state government is seeking the lifeline without passing through the National Assembly.
The state was said to be discussing options with the Federal Ministry of Finance on how to source such a huge capital outside the National Assembly.
According to investigation by our correspondent, the facility is being coordinated by East West Capital Corporation, a Canadian registered corporation, with offices in Calgary, Edmonton Alberta, Canada.
In August, the Debt Management Office (DMO) said the nation’s debt stock was about $22 billion, including the Federal Government’s share of $17.8 billion.
Although all the 36 states and the Federal Capital Territory (FCT) owe $4.28 billion, the debt profile of Kogi State as at August was about $32.37 million.
The loan deal has generated a crisis in the state with many alleging that it was a move by the governor to get the cash for next year’s polls and his re-election bid.
A lawmaker from the state said: “This is unfortunate. A $500 million loan deal will send Kogi State into perpetual slavery. The governor should account for how he spends statutory allocations from the Federation Account.
“We will ensure that this is resisted by the people of the state.”
According to a document obtained by The Nation which gave details of the loan proposals tabled before the governor recently in Lokoja, the state capital.
It reads: “As the funding institution is currently in the process of finalising a similar programme for Kogi State government, it is possible to cover the debts of the state up to $500 million. Once signed up, the process is speedy and the funds can be in the account of the state within 21 days of acceptance by the state.
“Besides the one-off facilitation fee, which is almost negligible, there are no other fees or hidden costs.
“If interested, the team from Canada will be able to join you for review and further clarification at the earliest possible time suggested by the state government.
“We spoke earlier on the subject of debt consolidation for the state. The Investment Bank in Canada will be able to take over all the debts of the state by paying off all the creditors, both locally and internationally, and own the debt, thus freeing resources for other priority projects of the state.
“Some may misconstrue this solution as a new debt, which it is not, but consolidation of the existing debts, albeit under a more lenient and affordable repayment regime.
The solution has the following merits:
The interest rate of the whole is reduced to single digit, thus the interest rate will fall from 18 per cent to 28 per cent, which is the average rates being suffered today to less than eight per cent (indeed between six per cent and eight per cent), thus immediately freeing up more cash to the government.
The repayment period can be extended from say 10 years to 15 years, thus reducing the repayment burden and further freeing up more cash to the government.
There is a two-year repayments moratorium, giving the government more expendable resources and time to establish additional projects from which to start/support and hence reduce the burden of repayments.
But the company explained that when it issues such a loan, it will monitor all the projects.
The document added: “All projects/loan applications are evaluated based on the overall amount requirement, the construction period, a monthly draw down schedule and capabilities of repayment – either via government guarantee, extended into taxation payment recoveries or a private enterprise project venture that generates its income capable to repay.
“Most Term Loans are amortised for extended periods, carry terms and conditions favourable to our valued clients, with agreeable interest free grace periods.
“Partnering with suppliers and contractors, the suppliers and contractors that are involved in the work on the projects, where placement of our investment funds is used, are expected to work under a code of ethics monitored through our independent supervisory management teams. We invite and introduce new technologies through our EPCM partners and supplier/contractor registration process and suggest to our project supervisory engineers that these new technologies be considered, if applicable, to specific project developments.”
Investigation revealed that some officials of the Kogi State government also had a meeting with certain officers in the Federal Ministry of Finance on Monday on how to seal the deal.
When contacted, a top official of East West Capital Corporation, Mahmoud, confirmed that the company was assisting Kogi State government on a facility.
He said: “We have already started the negotiation. It is for debt consolidation. The facility is for 15 years with a three-year moratorium.”
The Special Adviser on Media and Communications to the Minister of Finance, Paul Ella Abechi said: “The minister is not on seat; I would have just gone straight to ask her. She left Abuja for Kaduna for an event.
“I think the Director of Information should be able to give an insight or information regarding that. I am not aware that there was a meeting today, at least not on this floor. I doubt. If there is anything like that I will have a hint.”
For three days, all state government officials The Nation contacted refused to speak on the matter.