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Debt profile:Govt counters BudgiT’s report, says Osun is not insolvent

Debt profile:

Govt counters BudgiT’s report, says Osun is not insolvent

 

Osun state governor, Mr Rauf Aregbesola

OSUN State government has described as a gross misrepresentation of facts, report by BudgiT, a civic technology organisation, describing the state as tending towards insolvency.

In its reaction to the BudgiT report, entitled: “State of States,” where it described Osun debt profile as worrisome, the state government said the debt was still within its capacity to defray.

According to the statement signed by the state Commissioner for Information and Strategy, Mr Adelani Baderinwa, “the report is nothing but a gross misrepresentation of fact and a narrow view on the economic importance on the massive infrastructural projects funded with the loans and the laudable economic policies of the Governor Rauf Aregbesola’s administration.”

The statement added that “the BudgiT report, with all economic and financial indicators, is incorrect, short of expectation from a respectable and objective organisation and a total disregard to reports of other national and international organisations on the true situation of the state.

“BudgiT did not take into cognition, the report of the National Bureau of Statistics which described Osun as the second economic development state after Lagos in the South-West and the markedly economic improvement differences before and during the Aregbesola’s administration.

“Early this month, The United Nations’ Global Multi-Dimensional Poverty Index ranked Osun second richest state in Nigeria. Also, the Renaissance Capital, a leading emerging markets investment bank in Africa, has revealed that Osun, Ekiti, Lagos and Oyo states are the leading economies in Nigeria.

“Osun debt profile is put at N179bn by the NBS. The loan is still within the capacity of the government to access and pay back in a normal economic situation and government has indeed been servicing its debts without public knowledge before the Peoples Democratic Party (PDP) induced economic recession.

“The loans obtained by the Aregbesola’s administration have been prudently and judiciously used for the transformative development that is evident in every part of the state.”

BudgiT, in the report, had said “Osun’s sharp turn to insolvency has been preceded by a faulty economic plan, with the state’s unfortunate predicament now being used as a lesson in fiscal strategy.”

It faulted the state government for obtaining loans for projects that lacked the capacity to boost its internally generated revenue (IGR), which would facilitate repayment of the loans.

“The state received N123.59 billion in bailout funds – the biggest in contemporary Nigerian history. Osun’s spending plan over the years came with the borrowing of N18.38 billion to build six mini-stadia to amuse, and at best make its youthful population active.

“Also borrowed was N30 billion at a lending rate of 14.75 per cent, for roads and waterworks infrastructure which generate no income and, therefore, cannot provide for long-term sustainability repayment plans.

“Another N11.4 billion was borrowed at a 14.75 per cent lending rate to build schools, which would also unfortunately bring in no income into the state’s coffers. Even more debilitating to Osun’s economic prospects was that the repayments for all these debts ran concurrently and deductions were made out of whatever revenue was to accrue to Osun State.

“Taking these loans which did nothing to improve internally generated revenue amid large overhead costs means the bulk of the state’s existing revenue is instead diverted into debt repayment.

“Total personnel costs which hitherto stood at N16.8 billion in 2011 when government revenue was N54.8 billion, have increased astronomically to N32.4 billion, N42 billion and N48 billion in 2012, 2013 and 2014 respectively.

“Osun’s revenue, padded with savings from the fiscal buffer that is the Excess Crude Account (ECA) rose to N55.96 billion in 2012, hitting a high of N61.89 billion, before falling back to N57.1 billion in 2014. However, N4.84 billion, N2.87 billion, N8.54 billion and N12.65 billion was deducted at source to cover the state’s liabilities in 2011, 2012, 2013 and 2014 respectively.”

BudgiT added that “many economists and analysts report that Osun  planning model was defective, due to the wide variance between its revenue and its expenditure projections.

“The state’s budget plan estimated a spend of N88.14 billion in 2011, despite estimated revenue for the fiscal year being at N54.8 billion. Osun State followed the same trajectory in 2012, 2013 and 2014, with estimated expenditure projected at N150.13 billion, N234 billion and N216 billion, as against estimated revenues of N55.97 billion, N61.89 billion and N57.16 billion respectively.

“Such wide tangents between annual budgets and actual spending are the first signals of a financial disaster certain to happen.

“With a population of 3.49 million, consumption is directed primarily at food items, which are largely untaxed. The people of Osun State spend 70.3 per cent of their income on food (against the national average of 63 per cent), leaving a very small percentage for discretionary spending, including house rents.

“The state’s fiscal policies should, therefore, be directed at redistributing income and wealth among different segments of the population and building its middle class, whose income will naturally tilt away from food and related items.”

The report counseled that “IGR should sufficiently cover personnel costs and overheads cost of government, while federation allocations should be directed at social schemes – the building of schools and roads. Accordingly, debt should be invested only in self-liquidating projects.

“The state must also look at ways to include the over 1.4 million working population currently in its informal sector into the tax net. Given that most of the workers are primarily farmers and traders.

“Osun’s strategic plan should be running an incentive-based tax collection system. The state should also look at how it can unearth the economic advantages brought on by its proximity to densely-populated and industrialised neighbouring states including Oyo, Ogun and Lagos.”

 

 

– Nigerian Tribune

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