Last week, the Oyo State Government under the leadership of Governor Seyi Makinde announced the approval of the issuance of N100bn private bond tagged “Oyo Prosperity Bond” meant to facilitate the execution of priority projects in a bid to boost the state’s economic growth and development.
Addressing newsmen in Ibadan after last week’s State Executive Council Meeting where the decision was taken, the Commissioner for Information, Culture and Tourism, Dr Wasiu Olatubosun, said the fund would be raised in two tranches of N50bn each. Some of the projects to be financed with the bond, according to Olatubosun, include the construction of the 50-kilometre Iseyin-Ogbomoso Road, the Ibadan Circular Ring-Road and the upgrade of the Ibadan Airport.
The fund, he added, will also cover the development of Ibadan Dry Port and the rail corridor which would serve as economic hubs of the state. The commissioner further disclosed that the state would construct and upgrade, with modern equipment, one government hospital in each of the three senatorial districts of the state.
The Oyo government mouthpiece said: “Considering the infrastructural needs of Oyo State to enhance its economic potential, the state government has approved the issuance of private bond tagged Oyo Prosperity Bond to facilitate the execution of priority projects with a view to raising N100bn, which is to be raised in two tranches of N50bn each. The state government has approved Oyo State Prosperity Bond to allow for quick completion of these iconic priority projects.”
The announcement of the approval of the N100bn bond did not go down well with some opposition parties, particularly the All Progressives Congress (APC) and their members in the state. The opposition leaders took turns to knock the planned N100bn bond, describing it as Makinde’s financial recklessness occasioned by administrative naivety. They do not see any justifiable reason for the governor to resort to borrowing to finance infrastructural projects.
The APC candidate in the Oyo 2019 governorship election, Chief Adebayo Adelabu, is one of the opposition members that strongly condemned Makinde’s approval for the bond. Adelabu argued vehemently that the move is capable of plunging the state into eternal bankruptcy.
In an analysis by the Oyo APC leader, he maintained that “A number of facts about this proposed bond need to be disclosed by the government for financial transparency. This will enable the stakeholders to be clear as to the real implications of this step. For example, what is the likely interest rate on the bond, what is the proposed tenure of the bond, what is the source of repayment of the bond, what is the regularity of interest servicing on the bond, what is the mode of principal repayment, instalment or bullet, what is the implication of a default on interest and principal, what is the financial returns on these projects, if any, who are the parties (consultants) to the bond issue, what are their commissions, what are the other issuing expenses, and what is the net receivable on the bond after deducting the issuing expenses? These and others are the questions begging for answers.
“Having asked the above questions, it is quite easy to demonstrate the lack of capacity of the present financial status of the Oyo State Government to fund projects using a commercial bond of this volume and magnitude. Servicing the interest alone is a major burden on government finance before we start talking of principal repayment. At the prevailing rate, the best interest deal this government can get from the market is between 12% and 13% per annum. The most recent commercial bond concluded last week by NOVA Merchant Bank was at 12% just because of the prevailing low-interest regime. This is authoritative as I personally participated in the book-building. Most of the existing federal and state government bonds were issued at between 14% and 16%. Even at the lowest rate of 12%, Oyo State Government will have to be paying an interest of N12 billion per annum or N1 billion per month on the proposed N100 billion, until the principal is fully repaid especially if principal repayment back ends. And this interest repayment has to be immediate as it is usually paid twice a year, at 6months interval. There is no moratorium allowed on interest repayment on a bond issued…
“I’m also amazed at the projects listed on the proposed bonds and I wonder the kind of conversation that takes place at the EXCO meetings of this government.”
However, the Chief Press Secretary (CPS) to Governor Makinde, Mr. Taiwo Adisa, was quick to hit back at Adelabu, insisting that the APC chieftain was simply playing cheap politics in his criticisms of the Prosperity Bond unveiled by the Oyo State government.
Adisa, in a statement made available to newsmen in Ibadan, wondered why Adelabu, an ex-Deputy Governor of the Central Bank of Nigeria (CBN), would not put politics aside and look at the benefits of the proposed bond to the people of Oyo State. The governor’s spokesman maintained that Makinde, in his determination, to lift Oyo to greater heights, will not engage in anything that won’t bring prosperity to the state.
The statement reads: “The announcement by the Oyo State government on the issuance of a N100 Billion Bond tagged Prosperity Bond, has generated several reactions, especially from the opposition. While one would not expect some members of the APC in Oyo State to see anything good with the development, it has become imperative to react to some of the inane ideas being passed off as sound economic commentaries.
“This becomes particularly important, seeing how the governorship candidate of the APC in the 2019 election, Mr. Adebayo Adelabu, ran amok with imbalanced economic analyses on the matter in order to score cheap political points. We will like to state clearly to the right-thinking members of the society that in coming to terms with the need to opt for the Prosperity Bond, Governor Makinde is being guided by sound logic and scientific analyses that originate from unbiased quarters.
“For the avoidance of doubt, the 21km Ajia-New Ife Express Road project with a spur at Amuloko being constructed under the Alternative Project Funding Approach (APFA), a Design, Build, Finance project, at a total cost of N8.5 bn cannot be equated to the moribund and revoked Moniya-Iseyin road project awarded under the administration of the late Governor Abiola Ajimobi. The Ajia-Airport project is a Public, Private, Partnership (PPP) project which will benefit from private funds. Rather, the investor has taken the risk of tying his funds to that project because of his firm belief in the economic recovery efforts of Governor Makinde.
“It would be recalled that the failed N7 billion road contract awarded under the immediate past administration in Oyo State was never meant to be executed (as it was merely a job for the boys) targeted at raising funds for the 2019 election. It unsurprisingly failed to really take off and Governor Makinde was left with no other option than to revoke the contract, review, upgrade and eventually re-award it to a more competent contractor who is presently on site.”
The Chief Executive Officer (CEO) of YSEG Hotels and Suites, Ibadan, and a politician from Lagelu/Akinyele Federal Constituency, Hon. Olayinka Oladimeji Segelu, agrees with the CPS that the proposed N100b bond when accessed will be judiciously applied for the betterment of the people by the Makinde-led government. Segelu, like some other citizens of the state, is of the view that Makinde has so far demonstrated pragmatic and purposeful leadership, indicating that he is poised to take the state to a new era of prosperity.
Declaring that Makinde is a genuine leader who actually understands what governance is all about, and puts the needs of the people first, Segelu said: “The opposition is probably opposed to it (the N100b bond) in response to our earlier position on the legion of debts the immediate past administration left for the present administration which was generally condemned. The previous debt profile of the state was of no economic value to the people of the state. Hence, the startling revelations of fraudulent activities shortly after the then APC led government left.
“The present PDP led government, however, has shown to the whole world that it meant well for the people and determined to alleviate their sufferings. The N100b bond the government intends to secure from the financial system is project-targeted. Go and check the details of the bond and you would see that the government really meant well for the state. In most cases, the projects would energize the economic activities of the people and by extension, the state which will invariably set in motion a smooth process of repaying the bond without hurting the people of the state.
“Let me add that taking loans or bonds is not completely bad. But it must be judiciously used in such a way that it will not become a liability for the state and the generations unborn. The people of Oyo State should rest assured that the money will not end up in private pockets of a few people as we witnessed in the previous government. Makinde has proved to be different as seen in his style of leadership and approach to governance. Therefore, he can be trusted. The opposition members shouting at the top of their voices against the proposed bond do not want anything good for our dear state. With Makinde in the saddle, Oyo is safe!”