Nigerian states are beginning to weigh other options like debt instrument in the wake of declining income stream as COVID-19 takes a toll on Federal Government’s revenue, according to analysts’ views.
The government of Oyo State is one of the few that has decided to look away from Federal Government’s bailout and leverage the low interest environment to access capital for infrastructure development.
In its bid to facilitate the execution of priority projects that will further drive economic development, the state executive council on Tuesday approved the issuance of a N100 billion private bond tagged “Oyo Prosperity Bond”.
The fund, according to the state government, would be raised in two tranches of N50 billion each for the construction of the 50-kilometre Iseyin-Ogbomoso Road, the Ibadan Circular Ring-Road and Ibadan Airport upgrade.
Wasiu Olatubosun, Ccmmissioner for information, culture and tourism, who disclosed this after the state’s weekly Executive Council’s virtual meeting, said the state would construct and upgrade, with modern equipment, one government hospital in each of the three senatorial districts while also using the fund to cover the development of Ibadan Dry Port and rail corridor, the economic hubs of the state.
This comes after April figures from state-funded statistical agency, the National Bureau of Statistics (NBS) revealed that the revenue shared to states from the federation account saw a drop by 5.13 percent to N181.49 billion in the fourth month of 2020 from the over N191.30 billion shared in January.
According to analysts, the drop in revenue allocation was fuelled by the impact of COVID-19 pandemic, which affected both the demand and prices of crude oil, Nigeria’s biggest dollar earner.
Meanwhile, President Muhammadu Buhari on July 10, 2020, signed Nigeria’s 2020 record budget of N10.81 trillion to boost Africa’s biggest economy hit by COVID-19 and collapsing global oil price. The budget deficit for 2020 is estimated at more than N5 trillion
On the importance of the projects, the state government said the approved Oyo State Prosperity Bond would allow for quick completion of the priority projects.
Citing the construction of Iseyin – Ogbomoso Road, it said it was important because when completed, it would serve as a link road and help to save many hours spent on travelling and the lives of commuters who daily experience vehicular accidents on various roads that link the already dilapidated Ogbomoso Road.
On the project funding, the commissioner explained that it would be in form of Alternative Project Funding Approach (APFA), which allows for public-private partnership for funding of infrastructural projects in the state.
“With this approach in place, there will be transfer of projects’ risk to private entity while the hassle of debt management office (DMO) approval would be avoided and the quality delivery as well as quick completion of project would be ascertained,” the commissioner said.
According to Omotola Abimbola, a macro and fixed income analyst at Chapel Hill, it is a lot more difficult for states to tap the capital market because their cases are “restricted by regulation, unlike corporates that only need the approval of their board and the SEC.”
Meanwhile, the Oyo State Executive Council said it had also approved the establishment of the Oyo State Development Agency for Socio-Economic Advancement (OYODASA) to give room for the residents to have better understanding of government’s goals and help establish a shared vision between communities within the state and the state administration.
The purpose of the agency is to booster participation in governance at the grassroots, Olatubosun said, adding that the government would establish offices for the agency in seven zones and all the local government areas of the state.
“The agency will ensure government’s programmes and policies are better understood by the general public, mobilise favourable opinions for such programmes and policies, encourage informal education through public enlightenment activities and publications,” he said, saying it will establish appropriate framework for educating and orientating residents towards developing socially desirable attitudes, values and cultures.
