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Will N400 Billion Be Borrowed For Consumption Or Production? An Imperative Question Begging For Answers

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Will N400 Billion Be Borrowed For Consumption Or Production? An Imperative Question Begging For Answers

 

In reaction to my earlier publication titled, “ABIA STATE N567.2B BUDGET OF 84℅ CAPITAL AND 16%  RECURRENT EXPENDITURES: A COMMON MAN’S ANALYSIS,” one of my readers has requested Ferdinand Ekeoma to ask me: “How a State which will earn total revenue of about 156 Billion is having a budget of over 500 Billion and plans to borrow over 400 Billion in just one year.”

 


This publication is a response to that question, and I have carefully chosen to title my response to the question, “WILL N400 BILLION BE BORROWED FOR CONSUMPTION OR PRODUCTION? AN IMPERATIVE QUESTION BEGGING FOR ANSWERS.

 

Passionate and people-oriented leaders across the globe respond and act to solve firsthand problems confronting the society they govern, and Governor Alex Otti is not an exemption.

 

The imperative question should therefore be, “What will the 400 Billion naira be used for when borrowed”? “Will it be used to bake bread and share with cronies as was the case with some administrations in the past”? Or, “Will it be used for real democratic needs which consist of quality leadership delivery to the people”?

 

The fact remains that some states in the recent past( is Abia inclusive?) have been unfortunate in producing self-aggrandized leaders and the unavoidable consequence is that such states face a myriad of needs that must be urgently addressed. These enormous collective needs of the people cannot be addressed by mere sloganeering or with empty hands. Hence, the need to borrow appropriately – not under-borrowing or over-borrowing.

If money borrowed is appropriately utilised to serve the needs of the state, such debt will be repaid with ease, and the solution it will bring about will continue to be felt and enjoyed long after the administration that initiated it is gone.

 

Borrowing 400 billion naira in a fiscal year, as part of Dr. Alex Otti’s experience in a state requiring urgent capital project interventions, is a complex decision that requires careful consideration and strategic planning.

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The decision to borrow such a significant amount typically stems from the urgent need for capital projects that can turn the state into a big revenue earner like Lagos, Rivers, and the FCT. This includes infrastructural development, improved healthcare facilities, education, and other critical sectors requiring immediate attention. Dr. Alex Otti’s experience may involve prioritising key projects that align with the state’s developmental goals.

 

Borrowing on this scale has significant economic ripple effects on the state. The borrowed funds can inject the much-needed capital into the economy, stimulating development, job creation, and generating shared prosperity for all residents of the state. However, it also places a financial burden on the state, requiring prudent financial management to ensure long-term sustainability.

 

The aim is likely to achieve a transformative impact on the state’s infrastructure – roads, bridges, and public facilities may undergo a substantial upgrade, potentially improving the overall quality of life for residents. Dr. Alex Otti’s experience would involve overseeing the efficient execution of these projects to maximise their positive impact.

 

While borrowing is a tool for immediate development, the state must carefully manage debt servicing to prevent a negative impact on its financial health. Sustainable strategies for repayment and effective use of borrowed funds are crucial aspects of the decision-making process that must be fully explored.

 

Incorporating community input and maintaining transparency in the borrowing process is vital. Dr. Alex Otti’s approach may involve engaging with citizens, ensuring they understand the rationale behind the borrowing and how it aligns with the state’s development objectives.

 

There is no denying the fact that borrowing inherently carries risks, including interest rate fluctuations and economic uncertainties. However, Dr. Alex Otti’s experience would likely involve implementing risk management strategies to mitigate potential challenges and ensure the responsible use of borrowed funds. As a seasoned financial expert and technocrat who has been in the game of figures and numbers for many decades, the Governor must have thought through the entire process and brought his experience to the fore.

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That notwithstanding, establishing robust mechanisms for accountability and monitoring is essential. This may include transparent reporting on fund utilisation, project progress, and the overall impact on the state. Dr. Alex Otti’s approach may prioritise regular assessments to ensure that borrowed funds contribute effectively to the intended projects.

 

The decision to borrow N400 billion for capital development when the state’s internally generated revenue (IGR) currently stands at N156 billion raises important questions about fiscal responsibility, sustainability, and economic strategy.

 

The logic behind such borrowing could be rooted in the strategic investment needed for significant and urgent capital projects. By borrowing a substantial amount, the state aims to accelerate infrastructural development, stimulate economic growth, and create long-term benefits that might outweigh the immediate financial burden.

 

Moreover, borrowing can serve as an economic stimulus, injecting large sums of money into the local economy. This, in turn, would lead to increased economic activities, job creation, and improved living standards in the state. The expectation is that the positive outcomes will eventually contribute to higher revenue generation, potentially offsetting the debt burden.

 

The state might be facing a considerable infrastructure deficit that cannot be adequately addressed solely through internally generated revenue. Borrowing becomes a means to bridge this gap, ensuring that critical projects are executed to meet the needs of the population. Certainly, the Governor must be thinking in terms of a businessman that he is. Ever wondered why rich people around the world, including Nigerian billionaires, leverage bank credit facilities to expand their businesses and build a solid capital base for their companies?

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The decision assumes that the state can repay the borrowed amount over time. This capacity depends on various factors, including the effectiveness of revenue collection, economic growth spurred by the invested funds, and prudent financial management.

 

While the logic behind borrowing for capital development is to expedite progress, it also requires a delicate balance in principle. The state must carefully manage the debt-to-revenue ratio to avoid overburdening future budgets with debt servicing, potentially leading to financial instability.

 

There may be a strategic vision to diversify the state’s economy through borrowed funds. Investment in key sectors such as agriculture, digital  economy, technology, and manufacturing could be part of a broader plan to reduce dependency on oil revenue and enhance the state’s financial performance and resilience.

 

The state’s borrowing logic might also involve exploring public-private partnerships to leverage private sector expertise and funding for specific projects. This collaborative approach could share the financial burden while ensuring efficient project delivery.

In everything, transparent communication with the public is crucial. Clearly articulating the purpose of borrowing, the expected benefits, and the strategy for debt management fosters public understanding and trust.

 

In conclusion, the logic behind borrowing N400 billion for capital development with an IGR of 156 billion involves a strategic approach to address urgent infrastructure needs. It therefore necessitates careful planning, efficient project execution, economic diversification, and transparent communication to ensure long-term sustainability and the overall well-being and prosperity of the state.

 

Lastly, I would like to say that while I am not an economic expert, it is assumptive,  pre-judgemental, and nihilistic to think that managing a parish and managing a state are two different kettles of fish or two different ball games. Well, as different as they may be, the similarity is in managing people and all associated resources.

 

Written by Anokwuru, C. U. Ph.D

Political Analyst

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