Lagos is not broke, says Fashola (but, em, it’s drowning under foreign debt)

by Stanley Azuakola

Be not afraid, Lagosians, your state is not broke. That was the assurance given by the Lagos State governor, Babatunde Fashola, in an interview he granted to BusinessDay newspaper.

Governor Fashola however, did admit the following:

  1. His administration has floated two bonds (the N50 billion, 5-year, 13 percent series 1 and the N57 billion, 7-year, 10 percent series II.) To take care of them, there is a provision that a sinking fund be set up where 15 percent of the state’s internally generated revenue (IGR) is paid into the fund.
  2. Lagos State government has collected about 11 to 12 loans from commercial banks.
  3. The government also owes contractors. He did not disclose how much exactly this amounted to.
  4. The state also owes foreign debts, of which there are about 16 different components. Of this, about 9 or 10 of them are debts taken by the Federal Government on behalf of all the states, for projects like FADAMA, water resources, HIV, prevention.

Despite these debts, the governor said there was no cause for alarm.

According to him, ““We are paying our debt, we remain creditworthy, we still borrowed money from the banks recently because we have in this year’s budget borrowing provision to finance the deficit. We’re solvent, clearly. Who would even lend money to an insolvent institution?”

He said that the bond which was collected by the previous administration in Lagos State has been fully repaid by his administration, even before its maturity.

Concerning the 11 or 12 bank loans which the state government owes, Fashola said, “I think about 8 of them will be fully amortised by the end of this year, so that will leave about 4.”

He said that would not stop his administration from taking a few more before he leaves but promised not to leave the next government with a burden beyond what is reasonable.

Governor Fashola also said that the other components of the state’s foreign debt which were not taken by the FG on their behalf were used by the state government to fund the Bus Rapid Transit BRT/Lamata, LMDGP/slum clearance, LAWMA/waste management, and Eko education fund.

Again, he assured Lagosians that was all well and good because the loans were concessionary and attractive.

“We’ve built roads in Agege, schools in Badiya, schools in Bariga, in Shomolu and in Gbagada with part of the concessionary foreign loans. We’ve used the same loan to finance the BRT corridor. We’re using it now to extend from Mile 12 to Ikorodu. Ikorodu road was built 40 years ago, it’s still there.

So if we do this you can be sure this asset will stay for another 30 to 40 years. Now the money is deducted at source, from our monthly FAAC meeting. So we don’t even miss it, we don’t know we’re paying,” the governor said.

How sweet.

One comment

  1. Erm I don't know what you are trying to make a big deal out of here with your sarcastic tone but every well run institution requires some level of debt to run optimally and so far they are being used for the purpose with which they were acquired its all good.

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