In 2019, despite being the only State out of the 36 States of the Federation including the Federal Capital Territory, that exceeded borrowing ceiling due to high debt burden, Cross River State Government went on to acquire loans including an unapproved foreign loan of N1.4 billion.
Yet, the State Government cannot account for how the money was spent thus paddling Cross River State into deeper uncharted fiscal waters.
How N1.4bn Illicit Loan Was Acquired
Analysis of the 2020 Accountant-General’s audited financial statement of Cross River State Government has exposed illegal loan acquisition by the State Government.
Dissection of the financial statement reveals that the State Government accessed N1.4bn external loan otherwise referred to as foreign loan for what it tagged “AFD CRS National Programme for Food Security”.
Acquiring a loan for food security in a year of COVID-19 outbreak itself was not illegal. However, the mode of acquisition, question surrounding the utilization of the loan, disregard to alarming debt profile of the State does not only run afoul of the law but has ebbed the State deeper into debt abyss.
Although the 2020 revised budget had provided for the administration of Governor Ben Ayade to acquire N39 billion loan for the fiscal year, the approval was only for internal loans which are usually obtained from commercial banks. There was no approval for external loans in the revised budget. Regardless, the State Executive acquired N1.4bn external loan.
A trace on this loan in the Accountant General’s Report shows that this is not the first time Cross River State Government obtained a loan through this subhead. As of December 31, 2019, the balance on this particular loan subhead was N2.337bn. In 2020, there was no repayment on the loan. With the additional N1.4bn, the balance as at December 31, 2020 keeps the debt on this loan label at N3.719bn.
What is more, an analysis of yearly financial statements of Cross River State reveals a trend of extra budgetary foreign loan acquisition. For instance, in 2018, the State acquired N9.2bn external loan against the N5.6bn external loan approved by the State House of Assembly.
A Breach Of Cross River State Fiscal Responsibility Law
The State Executive has breached the Fiscal Responsibility Law of Cross River State by collecting a loan without budgetary approval.
Section 45 (2) of the law provides “Subject to the Fiscal Responsibility Act and without prejudice to subsection (1) of this section, each borrowing shall comply with the following conditions: (a) the existence of a prior authorization in the Appropriation Law or other laws for the purpose for which the borrowing is to be utilized.”
Besides, section 45 (1) of the law provides that when the State Executive writes the legislature for loan approval, information on how the loan will benefit the people must be provided. It states: “The State Government or its Agencies/Commissions and Corporation and Local Government Councils in the State desirous of borrowing shall specify the purpose for which the borrowing is intended and present a cost-benefit analysis, detailing the economic and social benefits of the purpose to which the intended borrowing is to be applied.”
The Office of the Governor, Clerk of the Cross River State House of Assembly could not give an explanation and provide evidence on how in their loan request and subsequent approval considered cost-benefit analysis of the loan.
Freedom of Information requests to these two offices were received in September 2021 and a reminder that followed thereafter was greeted with silence.
The request specifically sought for detailed information and documents on the interest rate, repayment plan, cost-benefit analysis and purpose for the loan contained in the message of the governor to the House of Assembly seeking approval for the loan coupled with approval from the State Assembly.
Our Source, a lawmaker at the Assembly who could not be named in this report for safety reasons disclosed that the State legislature did not receive a request for approval on the said loan.
He said “We are not aware of any N1.4bn foreign loan. The only loan request that we approved in 2020 was N35 billion from three commercial banks which were all for infrastructural projects. The Governor must have secured this one on his own.”
Government Fails To Give Evidence Of Spending From Loan
Even after acquiring the loan in violation of the law, investigations into how the Cross River State government spent the N1.4bn loan has left many questions unanswered.
For instance, checks for the Cross River State National Programme for Food Security in the revised budget of the fiscal year shows that there was no provision for the implementation of any project under that nomenclature in 2020. Yet, a tracking of the project in the earlier approved budget for the year which was nullified by the revised budget reveals that the programme was originally designed to be implemented by the Ministry for International Development Corporation. The food security programme which had the programme code 99000000024131 had capital provision of N30 million in the initial 2020 approved budget.
Contacted, the Commissioner, Ministry for International Development Corporation, Dr. Inyang Asibong said she is not aware of the project.
“I don’t know about this project. What happens is that sometimes, when loans are given to the State, it comes in through my budget. We just coordinate donor funded projects. There are ministries that implement these funded projects. I don’t know the Ministry implementing it but I am thinking it could be the Ministry of Agriculture.”
Additional Freedom of Information request and a follow up reminder to the Ministry of Agriculture and Natural Resources in December 2021 and January 2022 which sought information and spending evidence on Cross River State National Program for Food Security was not responded to.
The FOIA request to this office specifically requested for detailed information and documents on the execution of the project including, locations of the project, brief of the project which includes commencement and completion date, cost of each of the projects executed, list of bidders, contract approval letter, loan repayment plan and level of repayment.
Even still, in January 2022, TheMail Newspaper visited the Ministry of Agriculture and requested an interview with the Commissioner but this newspaper was informed that the Commissioner was not in office. Contacted on phone, the Cross River State Commissioner for Agriculture, Ntufam Okon Owuna declined to comment on the matter. “Sorry, I don’t grant media interviews,” the Commissioner told TheMail.
Yet, the description of the loan “AFD CRS National Program for Food Security” suggests where the loan was acquired, Agence Française De Développment (AFD). This is a French organisation that funds projects towards the realization of Sustainable Development Goals (SDG) across the developing world.
A letter seeking information on the project funded through their loan, repayment plan and level of repayment was sent to the organisation’s headquarters in Paris, France. In response, the AFD redirected this reporter to their local office in Nigeria. A Freedom of Information request was sent to the ADF country’s office in Nigeria on January 6, 2022. However, the request was not acceded to four months after.
Also, further findings suggest that the National Programme for Food Security is a scheme implemented by the Federal Ministry of Agriculture and Rural Development and the Bank of Industry (BOI) Limited.
Information on the program, published on the official website of Bank of Industry notes “The Memorandum of Understanding (MOU) designated BOI as the Fund Custodian and Administrator. BOI has the responsibility of fund disbursement, implementing and monitoring the projects as well as recovering the loan and interest therefrom.”
Freedom of Information Act (FOIA) requests to the Minister of Agriculture and Rural Development, State Minister of Agriculture and Rural Development, and Cross River State Officer of Bank of Industry, Pius Neji seeking information and evidence of the program implemented, were only responded to by Cross River State Officer of Bank of Industry. Neji told TheMail that the Bank of Industry does not have information about the program in Cross River State.
Cross River Debt Profile-Code Red
In the 2020 fiscal year, out of the 36 States of the Federation, Cross River State was the only State above the borrowing ceiling. According to the debt sustainability analysis framework, the ceiling for external borrowing is benchmarked at a State’s total debt burden not exceeding 250 percent of their total revenue in the previous year.
As at December 31, 2019, the total debt burden of Cross River State was N230.88 billion while its total revenue was N77.46 billion. This implies that Cross River State percentage of debt to the revenue was 298.06 percent thus exceeding the borrowing ceiling.
In spite of this, the Cross River State Government went on to acquire the external loan without requisite approval.
The illegal loan obtained contributed in no little measure to shoot up the total debt burden of the State thus pushing the State closer into a state of debt unsustainability. After the loan acquisition, the total debt stock of the State rose to N236.3 billion as noted by Debt Management Office, in its report of December 31, 2020. This burden left Cross River State as the 6th most indebted State in Nigeria including the Federal Capital Territory during the fiscal year under review.