Federal government on Wednesday gave nod to the request by the Lagos State government to borrow additional $200 million from the World Bank to finance its massive social infrastructures. The approval was one singular item that dominated the meeting of the Federal Executive Council, FEC, held at the presidential villa, Abuja.
Briefing State House Correspondents at the end of the meeting, the Minister of Information, Alhaji Lai Mohammed and the Minister of Works, Power and Housing, Mr. Babatunde Fasola stated that the loan would enable the state government to meet its infrastructural needs. Specifically speaking, Fasola who is the immediate past governor of the State said that the loan was initially $600 million, revealing that the agreement was made in 2011.
According to him, it was agreed that the money would be released in tranches if $200 yearly but suffered delays due to political differences between the state government and the the previous PDP led federal government. He said: “The point to make is that this is not a new loan. It is a segment of a programme of developmental initiatives and it was approved in 2010 with a total sum of $600 million for Lagos State to be disbursed in tranches of 200 million each year starting from 2011-2013.
“But it suffered delays as a result of partisan political differences in the last dispensation. After the first tranch was disbursed, there was a freeze on the second tranch. The initial agreements we had with the World Bank was a 40-year loan, a 10-year moratorium, 0.5 percent interest. “But because of the delays that subsequently characterised the partisan interference that took place, our profile as a nation also changed. We had become a bigger economy although money was being lent to us not now as a highly indebted nation anymore. So by the time this one was approved now because of the delays, we had lost the opportunity of 40 years as it is now a loan of 25 years.
“The moratorium has reduced to five years instead of 10 years. The interest rate had gone up to 2.5 percent, but what is still heart-warning about it is that it helps to finance infrastructure. Fasola who expressed gratitude to the present regime of president Mohammed Buhari for facilitating the process remarked that the loan would make life easy for the people.
He also said that the initiatives should be taken seriously by the States to enable them compete with one another. “It’s is heartwarming that this administration has taken it on and again fast tracked it so that the Lagos State government can continue its developmental programmes of infrastructure renewal, taking people out of poverty, reducing inequality because that’s the way to really distribute wealth in a society.
“That the World Bank has had the confidence now to lend sums tantamount to sub-national government is a testament of financial discipline, strong governmental structures and the establishment of institutions, rather than the World Bank writing programmes for those states and Edo has also benefitted, so also were Ekiti and I think Rivers and I believe this is the way to grow the economy of Nigeria. The States should develop their initiatives, show them to WB, which commits them to certain programmatic reforms in order to be entitled, so it is a very competitive thing.
“Perhaps people continue to wonder if these monies are paid. Loans like these are actually deducted at source at monthly FAAC meetings. So the risk of defaults of these kinds of loan is very minimal. So, these are part of deductions that come to every state once the FAAC accounts are rendered, your loan obligations would be factored”, he said.
Asked why Lagos, an APC-controlled state was the first beneficiary, the minister said “I mentioned partisan differences because I remember when the delays came up, I was told by the then Minister of Finance that she was getting complaints from PDP Governors that it was only APC states that were benefitting at the time from the World Bank loans. So we got access when we were in opposition, because we qualified and we met the competitive conditions and one of the resolutions we have taken is that we must encourage other states who meet these kinds of conditions across the party lines to be able to access them, because it is competition that really brings productivity”.