By Achilleus-Chud Uchegbu
One of the strong arguments for the removal of the subsidy on petrol was that it would make more money available to the states for development. Indeed, some state governments have reported increased revenue from the federation account, including Value Added Tax (VAT). This has also slowed the rate at which governors borrow from commercial banks or issue bonds from the capital market.
Rather than celebrating the rush to raise money from the capital market or mortgage the future of states through loans, many governors are now being rated based on their ability to execute landmark projects without borrowing. Such governors are lauded for their financial discipline. However, this cannot be said of Taraba State, where opposition to the government’s plan to seek a N500 billion bond from the capital market has sparked controversy.
Concerns are being raised because of allegations that an earlier N206.7 billion borrowed from commercial banks by the state government, under the close supervision of Finance Commissioner Sarah Enoch Adi, has not yielded tangible results. Many residents of Taraba are demanding explanations from the governor regarding how the N206.7 billion, sourced from Zenith Bank (N83.3bn), UBA (N50bn), Fidelity Bank (N50bn), and Keystone Bank (N23.76bn), was utilized before seeking another N500 billion, ostensibly to finance the 2025 budget.
The budget size itself is N431.3 billion. The security for the existing loan is tied to the state’s earnings from the Federation Account Allocation Committee (FAAC), Joint Account Allocation Committee (JAAC), Internally Generated Revenue (IGR), and Value Added Tax (VAT).
Interestingly, there are indications that the state government abandoned negotiations with development finance institutions (DFIs) that were willing to finance projects in the state, opting instead for a bond. DFIs such as Afreximbank, the African Development Bank, and the ECOWAS Bank for Investment and Development had been contacted for project financing in Taraba.
Available information suggests that these DFIs were ready to provide funds, but with the condition that the money would be tied to specific projects, unlike commercial bank loans and bonds, which are often released directly to beneficiaries without stringent oversight. DFIs insist on project-specific financing to ensure transparency and accountability, whereas commercial banks do not always enforce such conditions.
The state government had proposed several projects to the DFIs, including an Integrated Rice Project featuring a 16-ton rice mill and 10,000 hectares of rice farms in Wukari, a solar and hydro energy project expected to generate 50MW from solar and 30MW from hydro, and an industrial park with five clusters: processing, mineral beneficiation, logistics, residential and commercial housing, and general industry.
One of the DFIs was reportedly ready to inject $82 million into the rice project, which was projected to create 1,000 jobs and facilitate year-round rice production. However, the state government abandoned these offers in favor of the N500 billion bond.
Opponents of the bond argue that Taraba would benefit more from the DFI offer than from a bond. They highlight that the DFI funding option came with a ten-year tenor, a two-year moratorium, and a single-digit interest rate, terms significantly better than those of the bond. Given that the state has already mortgaged its FAAC, JAAC, VAT, and IGR earnings for the N206.7 billion loan, critics argue that taking on an additional N500 billion in debt would suffocate the state financially.
They contend that the DFI financing model would have been more sustainable, allowing projects to generate revenue and pay for themselves over time while positively impacting the people of Taraba.
This situation has raised concerns about the lack of progress in the state, despite initial expectations that the current administration would bring transformative change. Civil servants complain that public service operations are gradually grinding to a halt due to inadequate financing.
Although Emmanuel Bello, Senior Special Assistant on Media to the governor, dismissed claims that the state is struggling financially, insisting that IGR has improved and that this year is dedicated to infrastructural development, opposition voices argue that the government has little to show for its use of public funds.
According to the Debt Management Office (DMO), as of December 31, 2021, Taraba’s domestic debt profile stood at N81.3 billion, which was reduced to about N33 billion by March 2022. Its external debt in 2023 was recorded at $21.92 million. The state has a poverty rate of 87.72%, making it the second poorest state in Nigeria. Analysts attribute this high poverty rate to an overreliance on undeveloped agricultural potential, weak infrastructure, and insecurity.
Limited access to education and healthcare has further worsened conditions, with some experts blaming poor implementation of government policies and programs. Critics argue that the N206.7 billion borrowed from commercial banks should have significantly improved these sectors. They also believe that a DFI project-financing approach could have boosted agricultural productivity, moved the state away from subsistence farming, and enhanced the cultivation of crops such as tea and coffee, for which Taraba is known.
These concerns have fueled criticism of Governor Agbu Kefas’ leadership style, with many fearing that the state is missing out on opportunities for growth while accumulating more debt. This is particularly alarming in light of the fact that Taraba’s immediate past governor is currently being prosecuted by the Economic and Financial Crimes Commission (EFCC) for allegedly embezzling N27 billion during his eight-year tenure.
The most perplexing issue, however, is how a budget of N431.3 billion will be financed by a bond of N500 billion. According to the State Executive Council’s approval, the bond would be released to the state in tranches of N20 billion per year. The official statement reads: “To finance the 2025 budget, the state needs to collect N500 billion bonds from a financial institution.”
The question remains: How will this plan work, and why is the government opting for a debt-heavy approach despite alternative financing options?
