The Federal Executive Council (FEC) has approved a sovereign warranty for a loan of $242.2 million (N40 billion) for Lagos State Government for social infrastructural regeneration and development of other services, with emphasis on uplift of secondary education in the state. The terms of the loan include a 0.5 per cent commitment charge, 0.75 per cent service charge and yearly interest rate of 1.25 per cent, with a repayable period of 25 years, and five years moratorium.
The guarantee of this loan by the federal government signposts another welcome departure from the past acrimonious relationship between the federal, and some of the state governments in the country, especially Lagos. Approvals for mandatory administrative guarantees for such foreign loans had not been very easy to obtain in the past.
But the Federal Government, which earlier approved the first tranche of $200 million loan from a World Bank agency to Lagos State in 2010, has approved the new facility.
It is heartwarming to note, as the Information Minister, Labaran Maku, observed at the post-FEC meeting briefing, that the central authorities are passionate about the even transformation of all the country’s constituent parts. This had hitherto not always been the practice largely due to retrogressive politicking in the country. This new development signals a laudable commitment to responsible politicking and good governance by both tiers of government. Improving the lot of the people should have nothing to do with associational persuasions or other extraneous considerations.
The point that needs to be underscored by this warranty is that all the states need to evenly develop, without strangulation by the central authority. Indeed, any state or local government that lags behind is automatically a drag on development, and a setback to the affected communities and Nigeria, generally.
We look forward to more of such collaboration and synergy in the management of developmental issues in the country.
It is, however, necessary for Lagos State, which is the beneficiary of this loan, to ensure that it is not diverted under any disguise. The loan must be used for the earmarked projects. There have been instances in the past where such facilities taken in different parts of the country were deployed to areas other than the ones for which the loans were obtained. Such situations often led to the misappropriation of the funds by officials who did not share the vision for which the loans were obtained. Lagos State must avoid this and ensure that the funds are used for the specified purposes, for the benefit of the people of the state.
The Fiscal Responsibility Act makes it mandatory for any state which decides to take a loan to repay the same with interest and at the agreed time to avert unnecessary charges and costs. The repayment scheme for this particular loan is reasonable enough, and should be strictly adhered to, if the state is to avoid future loan burdens for subsequent governments and generations. Integrity should be the driving force in this transaction.
This financial intervention should spur the state government to speed up its developmental projects. Road projects are on in many parts of the state and need to be completed before campaigns begin for the 2015 polls. If there are going to be fresh projects, let them be ones that the next government will not abandon on grounds of irrelevance or inflation of contracts.
We call on the World Bank, the Debt Management Office (DMO) and the Ministry of Finance, among other allied agencies, to closely monitor the utilisation of this facility to forestall any impropriety. Other states, too, should improve their internal revenue generation to make them eligible for such loans, so that they can boost infrastructural development of their areas.
There is no doubt that Lagos has the capacity to repay this loan. The state government should, therefore, justify the confidence reposed in it by the Federal Government by ensuring that it abides by the repayment schedule. Both the Federal and Lagos State governments deserve kudos for this transaction that will have far reaching positive effect on public infrastructure in the state.