Investigation Into Cross River State Debt Misery: How N1.4bn Illegal Foreign Loan Cannot Be Accounted For 

In Breaking News, Business & Economy, CrossRiverWatch Podcast, CrossRiverWatch TV, Investigation

By Ekemini Simon, TheMail

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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 extrabudgetary 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.

Interestingly, the Cross River State Government acknowledged its state of debt unsustainability. The 2020 report of the Cross River State Debt Sustainability Analysis, signed by Commissioner for Finance, Asuquo Ekpenyong, Jnr and published in August 2021, noted “The long-term outlook 2020-2029 shows that debt will not be sustainable from 2015-2023 and will be sustainable from 2024-2029.”

Section 43 (1) of the Cross River State Fiscal Responsibility Law which focuses on the framework for debt management provides that “Government shall ensure that the level of public debt as a proportion of State income is held at a sustainable level…”

Be that as it may, the 2021 full year budget implementation report of Cross River State gives a gleam of hope to the State. The report shows that the State spent N10.2bn during the 2021 fiscal year on debt servicing. Although the money negatively affected funding that could have been used in key social sectors, the debt servicing reduced the debt profile of the State to N159.8bn according to the December 31, 2021 report by Debt Management Office, Abuja. 

Cross River State also generated a total revenue of N92bn including opening balance during the 2021 fiscal year. This development implies that the Cross River State percentage of debt to the revenue stood at 173.7 percent as at December 31, 2021. This entails that Cross River State may gradually be exiting the borrowing ceiling.

Running Cost For Office Of Chief Of Staff, Alternative To The Dirty Loan

Understanding the perilous debt level of the State, Cross River State Government had options of prioritizing their spending instead of opting to cross the red line for a scandalous funding facility.

For instance, if the State Government really needed to embark on a food security programme for the State at the sum of N1.4bn, the controversial spending made as running cost in the office of the Chief of Staff could have been redirected to this project.

The office of the Chief of staff recorded an overhead expenditure of N2.6 billion. Overhead expenditure is the ongoing expenses for operating an office.

This expenditure besides being the highest of the N6.62 billion overhead spent on 260 offices of the State, the spending is 39.4 percent of the total actual overhead disbursement.

Analysis of the 2020 revised budget revealed that top overhead provisions in this office were basically local and international travels- N620 million, vehicles maintenance service for the office- N623.3 million, other services- N912 million and miscellaneous expenses- N450 million.

The N2.6bn spent on these controversial items and in an office not established by law is about two times of the external loan acquired at the expense of the financial health of the State.

House Of Assembly Looks The Other Way

Section 125 (5) of the 1999 Constitution as amended provides that “The Auditor-General for a State shall, within ninety days of receipt of the Accountant-General’s financial statement and annual accounts of the State, submit his report to the House of Assembly of the State and the House shall cause the report to be considered by a committee of the House responsible for public accounts.”

In adherence to the provision, the Auditor-General of Cross River State, John Odey on July 29, 2021 presented his report to the State House of Assembly in which a query on the unauthorized loan was highlighted. Notwithstanding, 10 months after the query, the House of Assembly is yet to take oversight action on the dirty loan.

The inaction and spiral of silence encountered among members of the House of Assembly during the course of our investigation gives hint that the State Lawmakers may as well be collaborators in the scandalous acquisition and unaccounted disbursement of the fund.

TheMail gathered from staff of the House of Assembly that since March 2022, the Public Account Committee has not been operational in the Cross River State House of Assembly owing to the defection crisis that snowballed into the sack of 18 members by the Federal High Court, Abuja in March 2022. They noted that all financial issues are handled by the Appropriation and Finance Committee.

The Chairman, House of Assembly Committee on Finance and Appropriation, Mr. Sunday Achunekang was not forthcoming in giving the position of the State Assembly during the course of the eight months investigation. The Finance and Appropriation committee is tasked with the oversight responsibility of the Finance Ministry.

The Chairman of the Committee was not in his office thrice when TheMail visited the House of Assembly in December, January and February. He initially did not respond to calls, text and WhatsApp messages to his known phone line during the referenced period. However, when TheMail Newspaper reached back to him three months later on May 28, 2022, he obliged to speak with our reporter on the phone.

TheMail specifically requested information on what his Committee and by extension the House of Assembly has done about the query as highlighted in the Auditor General’s report. After a short silence, he said “Although I am the Chairman House Committee on Appropriation and Finance, I cannot speak for the House of Assembly on such a matter. The Auditor General summits his report to the Speaker and then the Speaker passes it to the House Committee on Public Account. So, I will ask you to reach out to the Chairman Public Account or the Speaker.”

TheMail requested from Achunekang the name and contact of the House Member who heads the Public Account Committee. The Finance Committee Chairman promised to reach back to this reporter on the subject but he neither reached back nor responded to further calls.

Effort to get a reaction from the Speaker, Cross River State House of Assembly, Mr. Eteng Williams, was unsuccessful. He did not respond to his calls, text and WhatsApp message. 

But when the Speaker’s Press Secretary, Hope Obeten was reached on phone, he claimed the House had addressed the extrabudgetary loan acquisition directly with the Auditor-General.

“That matter was sorted out with the Auditor-General. You can reach out to him,” he said.

When he was asked how and when it was sorted out, Obeten, who could not give an explanation, hung up the call. He did not answer further calls.

This newspaper contacted the Auditor-General, John Odey to know if he had followed up with the House of Assembly on his report or if the House of Assembly had addressed the issue with him. The Auditor-General declined to comment. “I don’t talk to journalists about the account of the State,” he said.

Acquiring Loan Without Budgetary Approval Is Criminal- Professor Of Finance

A Professor of Finance at the Federal University, Otuoke, Bayelsa State, Prof. Emmanuel Bush said that the Cross River State executive has no power to acquire loans not approved in the budget.

“Acquiring loan is not illegal especially when you meet up with the requirements provided for in the Fiscal Responsibility Law. But going against the law is criminal.”

Bush noted that what the State executive could have done was to send a revised budget with provision for an external loan to the House of Assembly for approval before the loan is acquired.

Citizens, EFCC Should Investigate The Illegal Loan – CSO Demands

A non-governmental organisation, Justice Development and Peace Caritas, JDC, has called on the Economic and Financial Crimes Commission, EFCC, to investigate how the N1.4bn illegal loan was spent.

In an interview with the organization’s lead, Williams Itorok, he stated that the inability of the government to give explanation on how the money was spent shows that something is amiss.

He added “If I say I am borrowing money to buy a textbook, for instance in a secondary school. If I received the money, I should be able to show what I used the money for. I should be able to show the books I bought, how I contracted the purchase of the supply of the books and I should be able to give evidence whether the books got to the schools.

“So, where you cannot show what you used the money for, it shows there is something amiss. I am not sure the Cross River State Government spent the money for what they got the money for. If you cannot show what you spent the money on, it is either you didn’t get the money or you got the money and misappropriated it.”

JDC called on the citizens of Cross River State who he said will be the ones to pay back the loan to work together with accountability institutions in asking questions on how the loan was used and why the State Assembly has not taken actions.

This Investigation Is Supported by Policy Alert

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