The bond issue controversy that has raged in Ogun State for over a year culminated in legislative fiasco last week. The leadership of the house of assembly, led by Tunji Egbetokun, was apparently sacked by a house of assembly, led by Soyemi Coker. Not minding the fiasco and the political crisis that now has to be resolved, the crisis is good to the extent that it clearly exposed the determination and desperation that underlined the proposed bond issue. Through the political crisis that has emerged, it reveals the sharp division in the state that would have prevented sensible economic policy and programmes taking place following a successful bond issue.
The crisis has enabled all parties involved in the bond issue, which include regulators such as the Security and Exchange Commission (SEC), the Central Bank of Nigeria (CBN), the Federal Government through the ministry of Finance, to realize that the political and economic environment in Ogun State is not viable for any bond issuance, not to mention that of a staggering N100 billion.
Put against any sensible economic criteria, the bond issue would not succeed. First, the N100 bond, though to be issued over a three year period, is a significant sum compared to the yearly budget of Ogun State. In 2010 alone, the bond issue that was expected which was N26 billion, would have been about 15 percent of the budget. By the time the interests and the principals will be paid back in the long term, it will weigh down heavily on the future generation of Ogun indigenes. This is simply because there were no concrete proposals in the public domain on how the money will be recovered from the projects to be executed through the bond issue.
Secondly, the State has publicly admitted in recent months that it is broke and cannot meet some of its critical expenditures, both short and long term. Ironically, this is a critical reason why the bond issue should not go ahead. Bond issues are not meant for States that are broke and looking for money for some recurrent nature of expenses, but States that can take the opportunities presented by the expansive bond market for economic growth and development in their States.
We are glad there are enough safeguards to help States present a good case before they can obtain long term finance in the bond market. The enactment of Debt Management Office (DMO) act if 2002 is particularly good. It requires that States, such as Ogun must receive permission from the Minister of Finance before they can approach the Stock market for bond issue. Critically, the permission can only be sought after the State house of assembly has given the nod, and there is a presentation of financial reports in the last three years. It is this permission from the house of assembly that has eluded the Gbenga Daniel led executive government in the last few years.
Without a doubt, our democracy is still shallow and weak, but progress such as that recorded by the refusal of the house of assembly should represent a progress. Notwithstanding, if there were any political undertone, this has enabled the debate on a critical economic issue to come out in the public.
