Debts: Okowa Opens Up, Appeals For Review Of 2015 Budget
ONE could have heard a pin drop when Governor Ifeanyi Okowa took to the floor of the Delta State House of Assembly, Asaba, to let the cat out of the bag on Thursday, June 25.
The level of indebtedness of the ‘Big Heart State has always been shrouded in secrecy, a kind of well-kept state secret, but when the governor spoke, there were no holds barred.
He was right on point as he reeled out the figures and statistics. Both lawmakers including Speaker of Delta State House of Assembly, Monday Igbuya, journalists and spectators, who huddled in the gallery could hardly believe their ears as Okowa painted a grim picture of the dismal financial state of the state.
Clearing the mess and restoring hope to the citizens of the oil rich state would certainly not be for the lily livered. Okowa said upon assumption of office on May 29 that, he was formally briefed by the Permanent Secretary, Ministry of Finance and the Accountant General of the State on Tuesday June 2 of the financial situation of the state.
The revenue receipts from Federation Accounts Allocation Committee (FAAC), he said has dipped significantly, dropping to N8.03 billion in April, (as received in May 2015), from a high of over N20billion in previous years.
Still in his lamentation, he said that with a revenue bond and indebtedness to commercial banks totaling N98.62 billion (Principal sum) coupled with an outstanding contractual obligations of N538,601,962,421.50 billion for a grand total of over N537 billion, the available fund of N5.4b is insufficient to offset the monthly wage bill of the 60, 000 workforce, let alone fund overhead costs, or for government to embark on capital projects.
He noted: “Unfortunately, the available fund of N5.4b is insufficient to offset our monthly wage bill, let alone fund overhead costs or for government to embark on capital projects.
The state workforce as at May 28, 2015 stood at over 60,000 with a monthly personnel cost of N7,437,940,015.38, inclusive of the N678m State Government’s support to Local Government Councils for the payment of primary school teachers’ salaries.” On Tuesday, June 23, the lawmakers had speedily granted Okowa’s request through a letter for a N10 billion bond offer by the Zenith Bank PLC.
Titled: “Restructuring of Existing Loan Facilities and Offer of N10 Billion Term Loan by Zenith Bank PLC” and dated June 22, 2015, the letter was read to lawmakers by the Speaker and it was unanimously approved.
In the letter, the governor wrote that the new administration met a huge bank/capital market debt burden of N96.62 billion with a scheduled monthly repayment of N4.6 billion. This, he explained was in addition to the monthly repayment of the state infrastructure development bond of N50 billion obtained in 2011.
Constrained by the huge debt and in order to free resources for other development purposes, Okowa informed the House that his administration had to resort to the bank, which has offered to restructure the state government is existing loan facilities and that of the state House of Assembly.
Okowa wrote: “The restructuring of the existing facilities and acceptance of the N10 billion term loan will mitigate the harsh impact of the liquidity crisis, reduce time lag in payment of salaries, pensions and overhead costs as well as ensure that take off of some key projects germane to the agenda of this administration.”
In his address to the legislators, he recalled that in 2011, the state government took a N50 billion facility from the bond market, with a repayment period of seven years in 84 installments at N1.098 billion each month. This facility will terminate in September 2018 with 40 more installments (totaling N43.92 billion) to pay with effect from June 2015.
Continuing, he said that in November 2014, the state also acted as guarantor to some select contractors supported by the issuance of an Irrevocable Standing Payment Order (ISPO) of N2.23 billion monthly, for which the contractors received the total sum of N40 billion.
He disclosed: “Currently the state is grappling with a Revenue Bond and indebtedness to commercial banks totaling N98.62 billion (Principal sum), while outstanding contractual obligations are N538,601,962,421.50. Okowa added that having paid four installments, the government now has 20 more monthly installments totaling N44.60 billion (including interests).
The state government, he declared has paid N19 billion and another N715 million overdraft facility outstanding with Zenith Bank Plc, adding that some other smaller loan and overdraft facilities totaling about N2 billion with other banks have to be paid.
Okowa lamented that a total monthly deduction of N4.60 billion, which will be made from the state’s FAAC receipts with effect from this June through to March 2017, and thereafter N1.098 billion monthly until September 2018, leaving it with a balance of N3.4billion assuming the FAAC allocation stays at N8.03 billion.
Currently, the governor added that the receipts from Internally Generated Revenue (IGR) is about N2.0 billion monthly, after deducting cost of collection, a situation that makes the fund available to run the state at N5.40 billion monthly in the next two years, except there is a significant rise in oil receipts and therefore FAAC earnings, as well as IGR.
He said that the 2015 budget of N409 billion as passed was no longer realistic in the wake of current realities, which clearly shows that the expected revenue is now far below what was projected. This budget, therefore, has to be reviewed.
He declared: “Mr. Speaker, the 2015 budget of N409 billion as passed is no longer realistic in the wake of current realities, which clearly show that our expected revenue is now far below what was projected. This budget, therefore, has to be reviewed.”
He wailed that it was obvious from available statistics that the state will run a monthly deficit of about N2 billion, and would need to borrow to pay salaries of its workers and run government. But then, as they say, sitting down in one place and lamenting one’s plight is the easiest and fastest way to be crippled. Something has to be done to reverse the pathetic state of affairs. Hope must be restored.
As a way out, Okowa said that the government must be ready to make the necessary sacrifices to reduce the cost of governance, while the endless turf battles and approach to legislative action would need to give way to civility and respect for each arm of government.
He advised that the lawmakers must make laws that protect and promote the interest of the state and the people and also act with the sense of urgency that the current situation demands, and navigate the ship of state aright.
The governor said that his administration was frantically working at putting the necessary machinery in place to boost the IGR while steps will be urgently taken to plug the loopholes in the revenue collection process.
The Majority Leader of the Assembly, Mr. Tim Owhefere (Isoko North), however, assured that there was no cause for alarm, as the issues raised by Okowa will be discussed on Tuesday, June 30. Owhefere said that far-reaching resolutions on a number of issues raised by the governor would be taken, as the financial situation of the state, which was laid bare by Okowa, was a step in the right direction.
Sitting down in one place and lamenting one’s plight is the easiest and fastest way to be crippled. Something has to be done to reverse the pathetic state of affairs. Hope must be restored. As a way out, Okowa said that the government must be ready to make the necessary sacrifices to reduce the cost of governance, while the endless turf battles and approach to legislative action would need to give way to civility and respect for each arm of government
The governor, he maintained has developed a culture of talking to the entire state through the representatives of the people, saying that the governor’s action is what obtains in developed democracy. The lawmaker explained that the briefing would enable stakeholders to know the true situation of things, as regards the current financial status of the state and the thinking of government.
Realising the governor’s five point agenda as encapsulated in the acronym SMART (Strategic wealth creation and provisions of jobs, Meaningful peace building platforms aimed at political and social harmony, Agricultural reforms and industrialisation, Relevant health and education policies and Transformed environment through urban renewal) will no doubt be an up-mountain task. With the sorry state of finance, one is at a loss how the governor would be able to deliver his campaign promises to the people.