Business & Economy - Viewpoint - September 27, 2021

The N140 billion miracle Udom Emmanuel performed

By Etim Etim

Governor Udom Emmanuel always sees himself as a wise man. But my conviction is that in most, or all his dealings with the people of Akwa Ibom, since he became the governor, he has often been clever by half.

In his discussions with journalists on Saturday, September 25, Governor Emmanuel was asked about his administration’s many uncompleted projects littering the state and how he hoped to complete them within the short time he has left.
In a rather comical manner, the governor went into a bizarre and convoluted answer he thought many would not fathom.

Recently, we just performed a miracle without relying on the statutory allocation (from the Federation Account). We disbursed well over N140 billion to contractors (handling various projects in the state. Where we got we got that kind of money from at this time is a miracle,” the governor said.

Since then, many prominent Akwa Ibom people have wondered how the governor could have been able to source N140 billion from. What miracle did Udom Emmanuel perform?

For me, the answer is that the governor did not perform any miracle. The man was simply spoofing, to deceive the people. I will explain, and it’s simple.

The contractors simply borrowed the money from the banks, while the state government guaranteed the loans and backed them up with an ISPO (Irrevocable Standing Payment Order) issued to the Office of the Accountant General of the Federation.

Structured as term loans, the facilities would be paid over a period of time, perhaps five to seven years. Repayments would be made monthly through deductions from the state’s allocations, considering that government is seen as a continuum.

The ISPO instruction to the Accountant General of the Federation to deduct amounts due every month from the government’s allocation from the Federation Account and credit the lenders until the facilities are fully repaid.

And because the government has issued an irrevocable order to the AGF, the hands of the successor administration in the state would be tied to an irrevocable commitment by the next governor to continue with the repayment till it is fully paid.

With this clever arrangement, the state government would be not be deemed to have borrowed the funds from the banks. Rather, the government’s guarantees are considered as contingent liability, as the loan is not a direct lending to the state, an arrangement that does not place any obligation on the governor to inform the State House of Assembly and seek the approval of the lawmakers. But my instinct is that the governor is wrong. Again, I will explain.

So, why did the state government choose not to borrow these funds directly from the banks and disburse to the contractors?

The simple answer is that the government was simply running away from the controversies associated with bank borrowing.

Many Nigerians are very sensitive to the idea of the country or a state borrowing, because of the contingent liabilities of servicing such borrowing.

Many people assume that since the contractors are the borrowers, the state government would be shielded from the pressures that would come from the bank charges payable on those facilities.
True! But you can trust that those charges would still be embedded in the contract sums and passed down to the state government by the same contractors at the end of the day.
In taking the loans, the contractors would have reached an understanding with the government that since the payment for the contracts would not be made immediately, and they would have to take loans to handle the jobs, whatever amount they file as claims from the state government would not only cover contract value, but also the interest and other incidentals, like the changes in inflationary rates as they impact on banking interest rates. In the final analysis, it is the state government that would absorb the charges, maybe double the figure it should have paid if the loans were taken directly from the bank at regular interest rates.
My humble view is that there is nothing miraculous or magical in what the governor did than a clever manipulation of data and information to deceive the people as usual.
Any junior bank officer knows that third-party guarantees are very common in the banking industry, and the banks would readily do business with a state government rated B+, like Akwa Ibom, because of its position as one of states privileged ro ne collecting tens of billions every month in oil revenue allocations from the Federation Account.

Any bank would readily lend money to a contractor working for Akwa Ibom government, provided such loans are properly secured with guarantees and ISPO from the state government.

Personally, I have no qualms with getting funding from the banks; and this is why I get pretty irritated by incessant ranting from Nigerians about President Buhari raising capital from multilateral institutions or international capital markets for various infrastructure development. These are actually cheaper than borrowing from Nigerian banks.

Again, Governor Udom Emmanuel is right to raise funding from the banks to complete some of his projects. I understand that he’s been quite worried about his legacy, especially in terms myriads of his unfulfilled promises.

But the governor is wrong to tell barefaced lies to Akwa Ibom people, by saying he has performed a miracle. What miracle?

He can never perform any miracle. There is nothing miraculous in issuing a guarantee to a contractor to borrow money from a bank. Does he think that we are all fools?

If anything, the governor has apparently violated the Constitution and the Oath of Office by hiding these transactions from the House of Assembly.

My suggestion is that the Speaker of the House of Assembly, and indeed, the members should immediately Institute an investigation into these quesrionable transactions and call the government to order. This may just be an impeachable offence.

Etim, a journalist and media consultant, wrote in from Uyo.

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