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Exclusive: Sobowale Writes World Bank To Defer Release Of $950m Loan To Nigerian States

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1 year ago

November 12, 2022

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One of Nigeria’s leading columnists and commentators on business and politics, Dr Dele Sobowale has written a passionate letter to the World Bank asking it not to release the $950 million loan package to Nigerian States in December as proposed.

Sobowale said that releasing the funds would be Christmas Bonanza for the governors who would use it for re-election purposes and where not, misappropriate it to the advantage of the citizenry.

Drawing reference from past history of international fund management, he said that the present set of governors are no different from their predecessors who put a debt burden on Nigeria.

In the passionate letter dated November 8, 2022 and copied to President Muhammadu Buhari and Governor Godwin Emefiele of the Central Bank of Nigeria, CBN, Dr Sobowale has also charged the Nigerian president and the CBN governor to hold on to the funds until after the exit of the present set of governors in May, 2029.

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PROPOSED RELEASE OF $950M LOAN TO STATES.

I was alarmed when it was published that the World Bank intends to release the $950 million loan approved for Nigerian states in December this year. With all due respects to those who made that decision, I am certain that it will amount to a great blunder to do so. Strictly speaking, the timing is inappropriate. Whatever purpose the bail-out is supposed to achieve will never be realised because it is absolutely the wrong time to release such funds to Nigerian Governors – irrespective of political party. It will amount to pouring water into a basket. The beneficiaries will be the Governors; the intended beneficiaries, the poor people, might never receive a cent in some states. Here is why.

OUTGOING GOVERNORS AND WINDFALLS

I deliberately started with Santayana’s observation about history because, I read a lot of history as elective courses as an undergraduate in the university. My over 30 years writing for VANGUARD has exposed me to a lot of Nigeria’s economic history before and during that period.

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Because you are all very busy, let me quickly provide a summary of our history with windfalls or financial bonanzas. ALL STATE GOVERNORS HAVE WASTED AND EMBEZZLED THE FUNDS – in one form or another. And, it matters very little whether the windfall resulted from loans or sudden rise in crude oil revenue. Three examples will illustrate the point.

1. 1973-1979.

The Yom Kippur War between Israel and the Arab countries brought the first windfall. Though I arrived in late 1974, it was obvious that there was only a delayed reaction before the rapidly increasing external reserves proved too tempting to be squandered. The Udoji Wards of 1976 provided the opportunity. By 1979, when the civilian government came in, Nigeria was the only country already borrowing among all oil-producing nations. By 1983, when another coup occurred, most states had borrowed more than they could pay. That was the beginning of our long period of chronic debt burden.

THE SECOND REPUBLIC: 1979-1983.

Attached is a copy of two pages copied out of my book IBRAHIM B BABANGIDA 1985-1992: LETTING A THOUSAND FLOWERS BLOOM.

You will see how quickly, an oil rich country, with relatively twelve debt-free states in 1976 became burdened by debt in 1983 when nineteen states replaced the dozen. That short period was not only the beginning of financially unviable states, what happened when the second election (the first was in 1979) was held in 1983, is the most important lesson for everybody now.

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All the Governors, who lost their bid for second term, had three months before handing over to their successors. In those three months, they not only increased the their states’ debts, they exhausted all the funds in the states accounts. The successors, in every case met empty treasuries and had to raise loans all over again. That was the Genesis of the debt-trap from which we were rescued by Dr (Mrs) Ngozi Okonjo-Iweala in 2004.

All the loans were guaranteed by the Federal Government.

THIRD REPUBLIC: 1992-1993

I skip the Third Republic because it ended so abruptly, the Governors had little opportunity to tamper with the states’ finances.

FOURTH REPUBLIC: 1999-NOW

There have been six elections so far. The first was in 1999. The second was in 2003. Three major political parties – AD, ANPP and PDP – contested in 1999 and 2003. In 1999, with Nigeria now having 36 states, 27 PDP Governors were elected, seven AD Governors and two ANPP Governors. In 2003, AD had only one Governor re-elected.

In the three months between election day and handing over on May 29, 2003, each Governor had exhausted all the funds in the treasury. Their successors were left with empty purses once again.

That has become the pattern in the elections of 2007, 2011, 2015 and 2019. Outgoing Governors exhaust the states’ funds, add more debt and spend everything before departure.

This then is the culture into which the World Bank, with good intentions, will release $950m.

CURRENT NIGERIAN GOVERNORS GROUPED

The thirty-six states, at the moment, can be classified into four:

1. States whose Governors were recently elected – 3.

2. States whose Governors will be elected before December 2022; but will not take over until early 2023 – 3.

3. States whose Governors are ending their first term and seeking re-election –4

4. States whose Governors are ending their second term – 26.

Given Nigeria’s recent history and culture of expenditure by outgoing Governors, it is obvious that the vast majority of Nigeria’s states will be placed at great risk if the shares of the $950m belonging to each state are released by December. One might even go further to question the wisdom in releasing the funds to groups 2 and 3. Group 2, because the out-going Governor still has enough time to mismanage a large part of the funds; and Group 3; because a Governor unsure of re-election might commit all the funds before election day; just in case he is not re-elected.

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The only relatively safe hands are those in Group 1.

STATES HOUSES OF ASSEMBLY ARE IMPOTENT

Unlike mature democracies, where state legislators represent the interests of the people, Nigerian state assemblies are absolutely impotent. In fact, they are eager co-conspirators in every scheme the Governor promotes – however wasteful or fraudulent. The recent appointment of 200,000 Special Assistants in a state, after seven years in office illustrates the point. No single lawmaker in the state has dared to question it.

Obviously, the World Bank, President Buhari and the Central Bank of Nigeria, CBN, cannot escape part responsibility for the mismanagement of these funds by Governors – if they are released by December 2022.

FINAL APPEAL.

I fervently appeal to all of you, individually and collectively, to postpone the release of these funds. And, let me provide a true story from 1983. I was a witness.

The Governor of the State where I was working unexpectedly lost his re-election bid in 1983. Even while challenging the outcome in court, he took three measures. First, he got the State House of Assembly to approve supplementary budget and loan. Second, he embarked on new long term projects immediately. Three, in the last week of his tenure, nearly 5,000 contracts were awarded and 100 per cent of the contract sum paid upfront. Few of the projects were executed because the contracts were awarded mostly to ghost companies.

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As it turned out, at the Tribunal established by Military Head of State, Major General M. Buhari, it was established that the same thing occurred in all the states where Governors lost their re-election bid. Unfortunately, nothing suggests that our politicians have changed. That is why releasing the funds in December would make the World Bank an accomplice before the crimes that will surely be committed.

Thank you Sirs.

Yours truly,

Dele Sobowale.

0708-137-2829

November 8, 2022.

His Excellency

President Muhammadu Buhari, GCFR

Presidency

Aso Rock

C/O: CHIEF OF STAFF.

President

World Bank