Group expresses concerns over the constant recourse to borrowing and the rising external and domestic debt profile of Rivers State.
The under the aegis of Niger Delta Citizens and Budget Platform (NDCBP), a coalition of non-governmental organisations interested in transparency and accountability, said the recent approval granted by the state House of Assembly for $280 million concessionary loan to be taken from the World Bank and the Africa Development Bank for the purpose of providing water and sanitation in the state, will only drive the state deeper into debt.
Led by Ken Henshaw, Coordinator of the group, it says NDCBP had previously advised the state government against predicating a significant percentage of its programmes and projects on funds expected to be derived through borrowing either as bonds, grants, domestic or external loans.
Statement reads, “Since 2008, Rivers State has experienced a steady rise in the amount it owes external creditors. In 2008, Rivers State owed $32.3 million which increased to $33.7 million in 2009. By 2010, it rose to $35.5 million and decrease¬d to $33.8 million in 2011, only to rise again to $36.6 million in 2012 and $42.6 million as at the end of 2013. The current external debt figure places Rivers State in the 20th position on the external debtor list.”
Henshaw noted that if the Rivers State government proceeds to borrow the $280 million approved by the House of Assembly, the external debt profile of the state will increase to $322 million, making it the second most indebted state in Nigeria, behind Lagos State. This is without the addition of a significantly large domestic debt amount which stood at N81.4billion and represented 5.2% of the total domestic debt of 36 states as at the end of 2012.
“A major concern in this regard, is the cost of servicing these debts.”
The budget of Rivers State indicates that the burden of debt service payment is already taking its toll on the finances of the state. Between 2010 and 2011, there was an increase of 2,500% in debt servicing re-payment. The amount of money which the Rivers State government sets aside for the repayment of debts, increased from N250 million to N6.250 billion. This trend resulted in the reduced capacity of the government to pursue infrastructural development.
The group however noted that the fact that the government has decided to initiate a new water project even after the Governor proclaimed in his 2014 budget speech to the state House of Assembly, that his government will not embark on any new project, but will rather concentrate on completing all on-going projects across the state. This creates the impression that the rationale for this loan came as an afterthought- only after the budget had been passed and approved.
The group recommends that the more prudent approach to development will be for the government to grow its internally-generated revenue base through lucrative investments, a more efficient taxation system, a drastic cut-down on wasteful expenditures, and the blocking of all avenues for leakages.