Before the curtain is drawn on Oyo’s N300bn loan debacle

By: Babajide Alex Adetunji

The recent decision of the Oyo State Government to approach the House of Assembly for approval to secure more loans to meet infrastructure demands and refinance an old loan has been met with criticisms from a section of the society.

Ever since the Honourable Member representing Saki West, Hon Shittu Ibrahim, chose his social media account to denounce the session of the House, where his colleagues lawfully considered the executive’s request, all sorts of opinions and commentaries have been written and aired. From downright baleful postulations to outright ignorant takes, different armchair analyses have been given on the subject-matter, which even Hon Shittu, the whistleblower, failed to take time to dilate on before his impish social media post.

While explanations from government and other informed commentators have sought to clarify the double-pronged facility, which seeks to free the state from an existing but burdensome loan and also fast-track its multiple commitments to the infrastructural development of the state, the water had become too poisoned for men and women of reason, who know that loans are not necessarily bad and that the refusal to borrow does not mean financial health for a state or a country.

But like the social media trend, “we listen, we don’t judge,” I had chosen to enjoy my writing hiatus, focusing on surviving in the country and going through my version of the Shege Promax that the Asiwaju Tinubu government has been showing us all, though some people, especially APC apologists, cannot but suffer in silence. Sadly, ti a bani a o se oogunikamo, enitiyoo je o niife, the APC-led Federal Government brought me out of that writing holiday when I read this morning that the Federal Government is seeking a 1.75 billion dollars loan facility from the World Bank.

After reading that report in the Punch, anger welled up inside of me. Bawoni obo se oritiinaki o se?The Federal Government being controlled by the APC is going ahead to borrow despite declaring that it raked in 20 trillion Naira in eight months. Yet, APC members in Oyo State are calling for Makinde’s head for seeking to borrow to finance infrastructure in Oyo, claiming that is a wrong step because revenues that accrued to Oyo State have shot up. What double speak? I hope Shittu can now go ahead to tell us how much Federal Government’s revenue has increased and also lampoon Tinubu on social media for seeking fresh loans. (At least, that will make him trend more). I also hope the Oyo State APC can help us lambast Asiwaju for seeking fresh loans.

Back to Oyo State’s loan palaver. I sought to further understand the situation and from what has been made available by government’s media handlers, I could understand that the facility being sought by the Oyo State Government is not a fresh loan of N300 billion as it was painted by Shittu and lapped on by several individuals and groups, who one would expect to do due diligence before putting pen to paper.

As per the words of Dr Sulaimon Olanrewaju, the Special Adviser on Media to Governor Makinde, what the state government sought approval for was a fresh loan of N151 billion, which according to him, is to be directly tied to infrastructure financing. Explaining this component of the facility, Olanrewaju described it as “a structured arrangement that allows government to fund ongoing and new projects while giving contractors the confidence to deliver on time.”

The second component, he explained, is a N149 billion facility, which is clearly for the refinancing of an existing loan. Now, this was where Shittu hatched the confusion and those siding with him failed to see the plot. Known in financial circles as Refi, loan refinancing in lay man’s definition means replacing an existing loan with a new one. However, it is more than that. While refinancing entails taking a new loan to replace an old one, the terms of the new loan including interest rates and repayment plan and period in the new facility must be more favourable to be considered.

What this means in Oyo State’s case is that the N149 billion for refinancing is being sought to clear off existing loans with higher interests and other conditions, which have become unfavourable overtime, because the interest rates on the N149 billion are lower than the existing facility. Another benefit of refinancing is that the repayment burden for the new loan will be easier. In this sense, the state government might be justified in saying that it is only seeking a loan of N151 billion. Why? Simple; because if it does not take the N149 billion for refinancing, the state will still continue to pay the existing loan with harsh terms but by taking the N149 billion, which by all means cannot be deemed a fresh loan, it will free more funds going to repaying the old loan through the lower interests from the new loan. Did someone say win-win or we still want to be blinded by the anger-laden commentaries and uninformed takes on this matter?

“For the avoidance of doubt, refinancing is not new borrowing; it is simply responsible financial management. Contractor financing, on the other hand, ensures that critical projects are completed without choking government cash flow,” Olanrewaju had further quipped. But rather than look at the substance in this position and ask ourselves the serious question on whether loans by Governor Makinde have been or are being put to good use, you hear stuffs like “mortgaging the future of our children,” “putting burden on the state” and all that.

If I do not know many of the projects executed by Governor Makinde, at least I have read about the 65km Moniya-Ijaiye-Iseyin Road, the 76km Iseyin-Fapote-Ogbomoso Road and the Oyo-Iseyin Road. I have also read about the works on the Circular Road and the Ibadan Airport as well as the Special Agro-Industrial Processing Zones. The APC should tell us if these projects are non-existent and then their take on Makinde’s loans will be justified.

If, for instance, the ongoing Circular Road project is not a fluke, have those talking about mortgaging the future of our unborn children thought about how much revenues that project will generate for the coming generations? Has anyone thought of the economic growth that Oyo State will experience when the AfDB-backed Special Agro-industrial Processing Zones fully take off? If, truly, Governor Makinde has been building all these and has succeeded in growing the state’s IGR from N1.6 billion in 2019 to over N8 billion in 2025 as being claimed, which the APC has never contradicted, then I think the state should trust his process and expect a better tomorrow from it.

Contrary to views that Oyo State’s revenues have grown and that it no longer needs to take loans, the reality is that the resources are barely enough to fulfill infrastructure commitments and the Federal Government, which pockets the highest chunks of revenues from FAAC and has also said it generated a huge revenue, has made this abundantly clear by seeking a fresh World Bank facility.

The N151 billion loan is not out of order once it can be justifiably spent to develop Oyo State, but if residents of the state like, they can block the N149 billion for refinancing and continue to service the old loan with painful outcomes. My position is that residents of Oyo State should, by now, be able to trust the Makinde process, which has taken Oyo State to the top rank of viable states in the last six years. Yes, they must still continue to ask the right questions, like what contracts the loans are tied to and the expected dates of delivery so that we can track the projects and crosscheck with the outcomes. But please, sentiments do not build nations or develop states.

Adetunji writes from Ibadan.