- Money diverted by ex-govs to fund elections, insiders allege
- Capital projects abandoned
There are strong indications that about N700 billion raised by 14 states of the Federation through bonds issued by the Nigerian Stock Exchange seven years ago cannot be properly accounted for as many of the capital projects, for which they were originally meant, have been abandoned.
Investigations by The Point have revealed that the immediate past administrations in Ekiti, Lagos, Kogi, Niger, Osun, Nassarawa, Rivers, Delta, Kwara, Akwa Ibom, Abia, Enugu, Ebonyi and Imo, respectively, raised the bonds at different times.
But many political and economic observers have not paid the necessary attention to the effects the heap of bonds already raised by some of these states are now having on their 14 states in N700bn bonds scandal finances.
Indeed, findings by The Point revealed that part of the funds had allegedly been diverted to other areas of interest to the ex-governors, including political activities and other frivolities.
This has also led to a situation where the projects for which the bonds were originally taken, have been abandoned because the governors’ successors, who are mostly from the opposition parties, have become incapacitated to carry on with such projects.
Investigations by our correspondent showed that eight of the 14 states, which have floated their bond programmes at the NSE, raised over N600 billion from the emerging bourse to fund specific capital projects.
The eight states are Ekiti, Lagos, Kogi, Niger, Osun, Nassarawa, Rivers and Delta.
A bond is a debt investment that an investor like NSE loans to an entity (corporate or governmental body) for a defined period of time (long-term) at a variable or fixed interest rate. The purpose of such fund is to finance capital projects in order to bridge the revenue shortfalls of the states.
The amount raised and expected to be refunded with interest by most of the states does not, however, reflect the revenue generating capacity of the states, especially now that the economic recession is biting hard on the states that are struggling to pay workers’ salaries.
Investigations revealed that, while Lagos is burdened with the highest debt, totaling N277 billion, Kogi State has the lowest bond issue of N5 billion.
In the case of Lagos, N50 billion (first series) was raised in December 2008 and another NI00 billion (second series) was taken in 2009.
A Peoples Democratic Party cheiftain in the state, who preferred not to be named, accused the ruling All Progressives Congress government of diverting the loans at the expense of Lagosians.
“Let them come out and tell Nigerians, and Lagosians in particular, how exactly the funds were used,” he said.
Within a space of eight years, Osun State has raised N30 billion; Delta, N50 billion; Edo, N25 billion; Kwara, N17 billion; Gombe, N20 billion; Niger, N15 billion; and Kaduna, N8.5 billion. 
Others are Benue, N13 billion; Ebonyi, N16.5 billion; Ondo, N27 billion; Ekiti, N25 billion and Bayelsa, N50 billion, among others.
The Point’s investigations also found that many other states were set to raise bonds from the market, in spite of the fact that some of their governors have less than a year to complete their tenure.
This development has, however, generated concern among political and economic watchers. Their fear is that if a state, whose governor has less than two years in office, raises money from the bond market, there is hardly any assurance that a chunk of the fund would not be diverted.
50% OF FUNDS EMBEZZLED – CRITICS
In line with the arguments of the observers, critics also believe that the said funds were not judiciously used for the purpose they were raised.
Some of them, who are aides of the new administrations across the states, alleged that the funds were diverted by the former governors for other uses such as financing electoral campaigns, which some of them eventually lost to the opposition.
In Ekiti State, former Governor Kayode Fayemi, had allegedly promised to use a chunk of the N25 billion bond raised in 2013 to construct a new governor’s office and government house, a civic centre, a 10,000-seater state pavilion and rehabilitation of the Ilawe-Igbaraodo- Iboji road, among others.
However, the current administration of Governor Ayodele Fayose has refuted the former governor’s claims.
The Special Adviser to the Governor on New Media, Mr. Lere Olayinka, disclosed that the projects were abandoned by the former administration some months to the 2014 governorship election in the state.
“The projects were abandoned and Fayemi and his men didn’t leave any money behind to complete them. N1.2 billion is being deducted monthly from the state’s allocation to service debts that the former governor took in the course of his four years. That is responsible for the inability of this administration to pay salaries,” Olayinka told The Point.
The governor’s aide further alleged that the rehabilitation of the Ilawe-Igbaraodo-Ibuji Road, which was awarded for rehabilitation by former governor Segun Oni’s administration at N200 million, was raised to N894.6 million by the immediate past administration.
In Delta State, out of the N50 billion raised by former governor Emmanuel Uduaghan in the bond market, the total actual proceed received by the state was N46.60 billion, indicating that about N3.40 billion was paid to regulatory agencies and parties to the bond.
But a top source in the state’s ministry of finance, who preferred anonymity due to the sensitivity of the issue, told The Point that N41.44 billion, instead of N46.6 billion, was reported to have been spent from the bond proceeds on the planned projects.
“The balance of N5.16 billion was missing from the bond proceeds. The report of the Hand-over Committee revealed that only a little over N1 billion was left in the bond account. The balance of the fund has not been accounted for by the officials of the Ibori-led administration,” he disclosed.
LAWYERS DEMAND LAWMAKERS’, EXGOVERNORS’ PROBE
Some legal experts have, however, blamed the alleged diversion of the funds and lack of corporate governance by the former governors on what they described as the weakness on the part of lawmakers at the state level.
They argued that the legislators in the various state Houses of Assembly, who were expected to scrutinise the proposals on the projects and ensure their strict implementation, shirked their responsibilities to do so.
A human rights lawyer, Azeez Sunmonu, explained that the evidence on ground in many of the states that have raised substantial sums of money through bonds issuance did not support claims that the funds were used for infrastructural development.
“Most of the public infrastructure such as roads, schools, potable water and hospitals are grossly inadequate and decrepit in many of these states that have raised money from bonds. The people on whose behalf the governments borrowed the funds are still in abject poverty while the politicians are living large,” he said.
He added that the legislators in the affected states that had already raised money through bonds must exercise their oversight functions by monitoring the spending of the said funds on the projects they were originally meant for.
According to him, the lawmakers must resist every temptation of accepting ‘handouts’ from any governor because their loyalty must be to the electorate, state and not to their ‘godfathers’ or political parties.
Another lawyer, who is also a Senior Advocate of Nigeria, Mr. Kanyinsola Ajayi, urged incumbent governors to probe both legislators and former governors who have allegedly diverted such funds.
He said if that was not done, the future generation would be indebted to paying back funds that were not judiciously used.
“If the money was diverted, the sitting governor should treat such a case in accordance with the law and it should not be swept under the carpet or limit criticisms to the pages of newspaper,” Ajayi said.
TREND MAY LEAD TO ECONOMIC SABOTAGE – EXPERTS
Economic analysts have also frowned on the trend they believe could lead to economic sabotage.
The Managing Consultant, FOA Consult, Dr. Fola Ojo, urged state governments to adopt a more prudent approach to borrowing.
Ojo said that if borrowing became inevitable, such funds must be channeled into productive purposes such as necessary infrastructure and employment generation that could impact positively on the people.
“A great disservice is done to tax payers if the state failed to put money raised from bonds to productive use; whereas the state bears the burden of repaying the facilities with interest over a couple of years and it is usually deducted from the states statutory allocation,” he said.
The United States-based economist added that state governments must be discouraged from doling out free money to their party supporters and hangers-on.
Ojo argued that, rather, the states should invent practical strategies to sustainably increase their Internally Generated Revenue through legitimate sources.
“States should avoid accumulation of debts in order not to mortgage the future of the unborn generation,” he said.
Another economic expert, Mr. Henry Boyo, admonished the states to devise more creative means of raising funds for executing their various projects.
Boyo argued that, though raising bonds from the stock exchange was a good means of addressing certain infrastructure decay, especially in a situation where allocations received by states from the Federal purse had dropped drastically, states should be more careful in obtaining funds from such sources.
“Bond is a good instrument but the level of the inherited debt should be considered before starting the process. Aside from economic implications, which are increasing debt portfolio and unemployment, it is more of lack of moral values,” Boyo noted.
A council member of the Institute of Chartered Economists of Nigeria, Dr. Kehinde Oteje, said that the diversion of such funds would be a clog in the wheel of progress of the affected states.
Oteje argued that the development could collapse the economies of the states, adding that the diversion of the funds was responsible for the outstanding salaries being owed workers by such states.
He charged the successors to the ex-governors to demand a probe and ensure justice.
“Most of the states are owing workers because they have diverted the salaries to settle part of the outstanding debt they inherited from their predecessors. If care is not taken, more workers will go on strike and the IGR of the states will shrink further,” Oteje said.
