Date: 2016-01-08

On the issue of the proposed 20 billion Naira bond in Kwara state- a fund which is equivalent to about $100 Million - I agree that there is a growing need for large-scale infrastructure projects especially considering our significant infrastructure deficiency which has been variously put at between N300 billion and N255 billion respectively by the Kwara state government at different times over the last two years. However, it is not reasonable that a state government with an inadequate balance sheet capacity wants to add more debt to its profile; not too long ago, Kwara state was declared not credit worthy by the Central Bank of Nigeria.

While I understand that budgetary constraints have left many governments financially handicapped and rendered them unable to pay for large scale infrastructure projects on their own, serious governments and policymakers are refocusing their efforts on how infrastructure needs to be financed. One of such ways is through the PPP model.

In the midst of this argument, we mustn't lose focus of the fact that bonds are debt instruments that must be paid back with interest to the investor whether or not the project is delivered; this is why many investors especially those we call vulture capitalists in finance find bond instruments very attractive. These investors will get their money regardless whether the project is executed or not. And because the Kwara state government over a period of time beginning from 2003 till date has not really operated a transparent government, we have a reason to be worried about this potential debt that will be added to our account. Few years ago, arsonists went to the State Ministry of Finance and didn't steal anything but curiously carted away vital documents from the Ministry. Years after this incident, no arrest has been made.

I am concerned that there is insufficient governance and transparency in Kwara state's financial reporting and believe there is a need for adequate disclosure. In 2014, when I joined with other concerned Kwarans to oppose the 23 Billion Naira bond that was proposed that year, Kwara state Governor, AbdulFatah Ahmed, claimed that the bonds will be used to finance the renovation of the Indoor Sports Hall, an Olympics-size swimming pool, and a Volley ball and Handball courts. Many of us were outraged? This is what you want to collect 23 Billion Nairas for? Concerned Kwarans made sure it didn't see the light of the day; it was argued then as it is been argued now, that this is one bond too many!

So far, according to official statements from the Governor, the Ilorin metropolis water reticulation project has gulped 5 Billion Naira, in dollar terms that will be around $25,650,000.00. The question is; are they building a new dam for the city of Ilorin? Yet, in many parts of the city, the residents are not able to access public water. Most have resorted to self help with the proliferation of boreholes and wells. How do you even begin to justify what has been spent so far?

If the claim of 900 million Naira monthly IGR is true, then the government would have been more prudent if it lives according to its means. If the Kwara state government curtails its expenditure, leverage on IGR, excess crude account (if there is still any left), Build Operate and Transfer and find some other sources of prudent financing to plug the infrastructure loophole, our ability to finance big capital projects will improve tremendously. Part of this also means that the contracts will be competitively bidded and the most reasonable, cost efficient and quality assured bidder - offered the job.

Even when going to the capital market becomes necessary, the government is better advised to look for projects with significant economic returns to the state. In this regard, the proposal to build the other two campuses of the Kwara State University at Osi and Ilesa Baruba is a welcome development. A clear departure from the mundane projects earlier referenced in 2014. The multiplier effect of building these two campuses is enormous; from the positive effect on the local economy of the affected areas to an increase in property value, the generation of both direct and indirect employment and the increase in access to education.

Going forward, the Kwara state government should consider the following when seeking infrastructure financing. The five itemized points listed below represents clear priorities for governments looking to finance infrastructure project through the bond market:

1. Assessing the level of available capital outside of the banking system with minimal long term interest rate

2. Sufficient governance and transparency in financial reporting.

3. Balanced tax and commercial policies.

4. Clarity of policies

5. Project-specific credit support.

As I stated in my last op-ed, when Kwara wins, we win together.Those in government today must be conscious of the verdict of history.

Abdulmumin Yinka Ajia, Department of Global Leadership, College of Business, Indiana Institute of Technology, Fort Wayne, Indiana, USA. Email: abdulajia@yahoo.com, Twitter@AbdulAjia