The Senate on Thursday rejected a request for a $350 million loan from the World Bank by the Kaduna State Government.
The rejection followed a presentation of the committee’s report by the Chairman, Shehu Sani (APC, Kaduna Central).
Last year, the Kaduna State Government requested the loan for ‘Development Policy Operation’ from the World Bank.
The state governor, Nasir El-Rufai, had said the state needed a $350 million loan from the World Bank to achieve its governance objectives in the “short to medium term”.
He also said the Bank agreed to provide the facility after “checking the laws, accounts, and performance of the state”.
The Sani-led committee, however, suspended the state’s request for foreign loans, adding that no loan request will get approval until the lawmakers were convinced about it.
Mr. Sani, who has been having a running political battle with the governor of his state, however, explained that due process must be followed before any loan is approved and that he has the duty to ensure the state does not inherit a debt it could not repay.
Reading out the findings, observations as well as recommendations of the committee, Mr. Sani explained that one of the reasons for the rejection is because “Kaduna State is the second most indebted state in Nigeria”.
Mr. Sani also said the panel met with relevant officials before arriving at the decision.
“Based on the submissions and interactions with the invited Government officials, the Committee observed as follows:
“1. That the Development Policy Operation, DPO (Budget Support) of USD 350 million for Kaduna State was approved by World Bank in 2016 and captured in 2016 – 2018 borrowing plan as approved by the National Assembly."
“2. That the credit facility has an attractive low financing data of 1.25% interest; moratorium of 5 years and a 25-year maturity tenor."
“3. That the facility is already captured in the 2016-2018 Medium Term Expenditure Framework (MTEF)."
"4. That according to the latest Debt Management Office figures, Kaduna State has a total debt stock of USD232.1 million."
“5. That approving the current loan request of USD350 million for Kaduna State will bring its total debt stock to USD582.1 million."
“6. That if this loan request is approved, the new total debt stock of USD582.1 million for Kaduna State will be unsustainable and necessarily attract huge financial burden on the meagre federal allocation to the State."
“7. With the new borrowing, the Debt Service to Revenue Ratio of Kaduna State will further be increased and thus impact negatively on the ability of the State to meet other basic needs of its people.”
He further explained that the new debt stock will likely, further erode the economic viability of the State and recommended: “that the Senate do reject the request of USD350 million for Kaduna State as contained in the 2015 2018 External Borrowing (Rolling) Plan of Mr. President, Commander-in-Chief of the Armed Forces.”
“With the high total debt stock of Kaduna State at the moment, the new borrowing sought will make the debt service to revenue ratio high, thereby worsening the State Government’s ability to meet its other basic obligations to the people and further erode the economic viability of the State,” he added.
Suleiman Hunkuyi (APC, Kaduna North), while supporting the recommendation, said he is “amazed, perplexed and in shock” to find that what the governor has gone ahead to indicate to the general public “is completely different from what was found on the application of the facilities as indicated in the detailed drawdown table”.
“As a representative of my people, I’ll like to say that the application of that loan is a misplaced priority. I strongly stand behind the prayers of the chairman of the committee that this very important chamber do reject that request for the loan,” he said.
Also supporting the recommendation, Danjuma La’ar (PDP, Kaduna South), explained that the loan is “not important” and as a messenger of the people, he was not given the authority for a loan to be approved.
“I met with the representatives of Kaduna state and asked what the loan was all about? What projects is this loan meant for? I should know from zone one, two and three who are the contractors responsible for the project? Where will the projects be sited? But these questions were not answered."
“I realized that the money received in Kaduna state is much and there is nothing happening in Kaduna state lately. They are busy retiring and sacking people and you are asking for a loan. To do what with the loan? I don’t understand. If you are collecting a loan without giving a reason, I am not in support of such loan, my people are also not in support of it. Please, this loan should not be granted,” he said.
The Deputy Senate President, Ike Ekweremadu, while stating that loan application is an acceptable means of infrastructure financing in governance, however said “the law in its wisdom has made provision for the parliament to interrogate such requests to be sure that there is no need for that loan and ensure that due process is followed.”
“Also, to ensure that existing loan portfolio for the state or federal government would be able to accommodate such further request so as not to put so much pressure on that state or the federal government.”
Mr. Ekweremadu, thereafter, put the question and the senators unanimously rejected the loan request.