In apparent reply to Governor Okorocha’s claim that his government is not indebted to anybody, the former governorship aspirant in Imo State during the 2015 general elections under the platform of the All Progressives Grand Alliance (APGA), Mr. Okey Theodore Ezeh, has said that Imo State under Rochas is heavily indebted to the tune of N110bn, stressing that by the end of 2015 Imo State’s “domestic debt was captured at N7174bn and external debt at $59.16m”.
Okey Ezeh is the CEO of Savvycorp Limited, a Victoria Island, Lagos-based investment and management advisory and architect of the Imo Marshal Plan (a comprehensive developmental blueprint designed to reposition Imo as the 4th largest state economy in Nigeria by 2023).
Delivering a lecture to a prodemocracy Imo group on Friday March 17, Okey Ezeh said: “There is paucity of requisite information that can be used to glean the current debt profile of Imo State but verifiable data exits that pinpoint the figure at N83.4bn as at the end of 2015 fiscal year when the state’s domestic debt was captured at N7174bn and external debt at $59.16m. Given that FAAC receipts for the 1st half of 2016 stood at N14.2b as against about N19.8bn in the 1st half of 2015 and factoring in total external debt figure of $60.22m for 2016, we can hazard a current debt stock estimate in the region of between N100bn and N110bn at best.”
Governor Rochas Okorocha had during a breakfast meeting with journalists in the state at his Spibat mansion in Owerri on Tuesday March 14, 2017, said that his government is not owing any bank. The Governor said that opponents of his government have been talking about his borrowing from banks because of the numerous projects his administration has executed.
Okorocha said that that instead of his administration borrowing, what it had done was to pay the money borrowed by administrations before him and he has done that so that the state won’t be in debt after him, stressing that his opponents have been imagining that he has borrowed money to be doing all that his administration has achieved in five years, stressing that the truth of the matter is that his government is not indebted to any bank.
“For posterity, this government is not owing any bank or person any amount except for the bailout fund for which 100 million naira is being deducted from the source monthly. Any subsequent government that comes and says that Rochas borrowed is a criminal one”.
But giving the lecture on “Imo State debt profile: The facts and the fictions – present and future implications”, put a lie to the claims by the Governor.
Diagnosing Imo State’s problem
But Okey Ezeh noted: “All over the world, debt instruments are recognised as development tools in the hands of individual entrepreneurs, corporations, agencies and governments who utilize them to raise the bars in the financial and economic wellbeing of the entities to which such facilities are applied, adding that “The use of debt instruments whether by governments, private corporations or individuals require certain skillsets that shape the success of failure of such venture.”
He said that “loans or debt instruments are typically applied to projects, initiatives, schemes or concepts which re-position the borrowing entity by endowing them with regenerative capacity to raise performance standards so as not only to repay the loan obligation at a future date but to also acquire structural capacity to catapult them from one rung of the development or attainment ladder to a higher rung.” He stressed that government bonds and loans should be managed the same way SME working capital is managed.
The finance management expert and astute politician noted that that Imo State economy had been badly mismanaged since the inception of the Okorocha administration, saying that “Imo State has been particularly shepherded into a financial straightjacket given that its IGR figure in the same period dropped from N7.6bn in 2013 to N5.5bn in 2015 even while personnel and overhead costs continued to balloon.”
Okey Ezeh stressed that the financial condition of Imo State calls for worry, saying that “A cursory analysis of the financial state of the entity known as Imo State will reveal that its resources have not been managed in an optimal and prudent fashion.
“Out of an average monthly revenue of about N3.2bn accruing from statutory allocations (N1.82bn), VAT (N727.22m), 13% Derivation Share (N172.35m), and IGR (N456.05m); an average monthly expenditure of N4.85bn (made up of N2.04bn personnel costs and N2.81bn overhead costs) soaks up all income and digs a monthly deficit hole of N1.68bn.
“This figure does not factor-in debt service costs conservatively projected at about N500m monthly. (N403m alone represents Irrevocable Standing Payment Order – ISPO – monthly deduction for 84 months which the state executed with the office of the Accountant General of the Federation in 2015 in connection with a N20bn bond draw-down).”
He added that “(Imo) State is reeling from excessively bloated and avoidable overhead costs just as core resources are frittered away on a multiplicity of white elephant projects that have zero capacity to stimulate growth in the local economy or even engender gainful employment for its teeming citizens.”
How Ohakim’s funds were badly mismanaged
Okey Ezeh observed that Imo State under the administration of former Governor Ikedi Ohakim had obtained fund through issuing of bond for the rehabilitation of Imo Water Scheme in order to provide pipe-borne water to Imo people, build the Oguta Wonder Lake and Conference Center, which was conceptualized to make the state a tourist destination, but regretted that the balance of over N18bn from the bond was diverted from the original purpose for which the bond was sourced, to fund other projects such as the 305 school buildings, the 27 general hospitals, etc.
He said: “The first tranche of bond proceeds drawn-down in 2009 was for the overhaul of the Imo Water Scheme, an ambitious project conceptualised in the hey days of the Mbakwe administration to deliver reticulated pipe-borne water to the vast majority of homes in the state. It was also to fund the Oguta Wonder Lake Resort and Conference Centre that its initiators touted as a mini-Disney Land capable of permanently stamping the state as preferred tourist destination with all the economic multiplier effects.
“The balance of the N18.5bn bond proceeds was to go to the rehabilitation of the state’s existing road infrastructure while birthing about 33 new roads including the trumpeted 150-kilometre stone-based, dual-carriage Imo Free Way designed to traverse 500 communities, 29 council areas and 39 markets in the state with commuters reaching the state capital in Owerri within 30 minutes from anywhere in the state.”
The Imo State governorship hopeful noted that “a significant percentage [of the bond fund] had been expended on original purpose projects by the Ohakim administration”, it was later abandoned by the Rochas government, describing the diversion of the fund as curious.
“The bond money was later to be curiously re-routed to other purposes such as construction of 305 classroom blocks, 27 General Hospitals and construction of some road projects even after a significant percentage had been expended on original purpose projects and abandoned!
“Even then, a subsequent N20bn draw-down in 2015 was to tackle critical infrastructure and complete on-going projects with a diverse shopping list which included projects like the Imo Towers of 1,000 Housing Units targeted at high net worth individuals and Imo citizens in the Diaspora; the Ecumenical Centre known as Amarachi; the Magnificent Towers known as Akachi; the five star Crystal Hotel; Ultra-Modern shopping malls; Multilevel car parks; the Ultra-Modern Judiciary Headquarters and Princess Hotel, Okigwe, All these projects have, to general consternation, either remained on the drawing board or have left the state economy more ravaged than reflated.”
Ohakim had earlier said that he left more than N20bn when he left the government in 2011, saying that Governor Okorocha changed the purpose for which the bond fund was meant and used the money to fund fresh projects that have no impact on the life of the people and the economy of the state.
Ohakim had also said that his policies were capable of catapulting the economic conditions of the state, saying that his leaving office in 2011 in a fraudulent election signposted the economic woes the state has witnessed over five years.
Loans have been mismanaged
But Okey Ezeh regretted that the state government has not made good use of the loans by investing in the economy of the state, especially in areas where the state has comparative advantage. “In all of these landmark borrowings, no effort was made to redraw the industrial landscape of the state by re-jigging investments in the hugely vital agro-industrial sector where the state has major comparative advantage with the neglected Adapalm, Imo Rubber Estates and Avutu Poultry facilities.
“Instead, large scale asset stripping was systematically carried out under the guise of concession schemes that threw up “investors” and concessionaires of questionable pedigree. Adapalm went for N3.5bn to a certain Roche, Concorde Hotel and Oguta Lake Motel were flung to ABM Global for 20 years for undisclosed consideration; 18 General Hospitals were sold to Lantech Solutions while the Imo Transport Corporation was leased to Global Ginikana for a reported N250m even as the Avutu Poultry, Nsu Tiles Company, Umuna Bricks Factory, Egbema Power Plant, Aluminium Extrusion Plant, Standard Shoe Factory and Imo Rubber Estates, among other low-hanging investment fruits were left comatose.”
Bleak future for Imo State
Okey Ezeh said that the current realities in the state economy post very negative consequences for the people if nothing is done to remedy the situation. He noted that in the current situation Imo State does not have the capacity to raise fresh loans, as the state is weighed down under debt burden.
He warned that even if there were opportunities to raise more loans most creditors would reject the loan proposal, saying that Imo State still struggles with N500m monthly IGR.
“Imo is a highly populated state with over 60% of its approximate 4.8m citizens falling within the ages of 18 and 36 years. The state is very highly leveraged and does not have the wherewithal to raise new loans to support activities of government.
“Even if there were to be any room to create more debt stock, most creditors would balk at such prospect. The clear options for a vibrant Imo with sustainable development outlook would be the enthronement of an accountable, value-for-money, knowledge-driven, global-best practices compliant administration that lays high premium on low cost overheads and revenue maximisation.
“It is laughable that Imo still struggles with IGR of below N500m a month (as at 2015) at which period her neighbors, mostly non-oil producing states but with similar demographics, were coasting home with figures like N1.12bn (Abia), N1.23bn (Anambra), N919.37m (Ebonyi) and Enugu (N1.51bn). Revenue collection in the state has been as chaotic as it has lacked transparency as a horde of private task masters of doubtful distinction are more often than not entrusted with this critical matter of public trust.
“The issue of horrendous overheads is another matter. Government is still run as a merry-go-round where all manner of jesters and charlatans with filial connections are readily availed opportunities for rent-seeking and collection at the expense of the long-suffering tax payers. Coteries of fawning hangers-on and long vehicular convoys often herald the appearance of officers of the state just as frivolity is elevated to a state policy with the random declaration of days of extra holidays anytime the Yuletide period approaches when in fact the bureaucracy should be opening up and facilitating the injection of more transactional inflows into her coffers from returnee kith and kin especially from the Diaspora.”
Unemployment is the biggest threat in Imo
Okey Ezeh continued: “In all of this the biggest time-bomb that needs to be swiftly defused in the state is the unemployment time-bomb. Imo has well over 800,000 youths both living in the state and outside of it who wake up every morning with nowhere to go to and nothing to productively and meaningfully engage them.
“This number is more than the total population of Malta and Barbados put together! Yet it is a state blessed with vast arable farmland, solid and oil mineral resources, untapped tourist potentials and perhaps, most importantly, a young, resourceful, educated and intelligent population.
“The Chinese economic miracle was initially wrought using the State Capitalist Model. In this approach, the state leads the way in job creation until there is enough economic activity in the state for the private sector to properly take off.”
The way out: A new economic model for Imo State
Okey Ezeh said that the only way out for the state is enthrone a credible and transparent administration that would adopt a new economic model for the state.
“The challenge is that since most state governments are heavily indebted and therefore unable to increase civil service employment, without reducing individual civil service remuneration. The key policy thrust of a state like Imo should be to create jobs through State Capitalism which means that the states acts as an investor by creating new State-Owned Enterprises (SOEs) that operate according to private sector mechanisms, are based on sound business plans and are entirely independent of government. The key consideration here is that the SOEs would not only serve government, but also generate income from rendering services to the private sector, which would eventually lead them to becoming self-sufficient.
“As private sector for-profit entities, SOEs as conceptualized are able to enter into technical partnerships with investors for knowledge transfer and access to non-state funding, and would therefore be better positioned to render efficient and effective services to both government and the private sector.
“This economic model if and when properly implemented has the proven capacity of creating 300,000 private sector jobs within the first two years of initiation. There are still other blueprints that border on large scale Entrepreneurship Training Programmes and Agro-Industrial, Creative and Tech Industries (Entertainment, Dance, Music, Film, Advertising, Graphic Design, Arts, Social Media, Software/App Development, E-Commerce etc.) Initiatives that can combine to permanently keep the unemployment wolf away from Imo’s door without mortgaging generations unborn with unpayable debt stocks.
“It does not require any clairvoyance to know that the days of easy money derivable from a mono-product economy are gone for good. Advances in science and technology have continually diversified energy sources in such a way as to put at the world’s disposal more environmentally friendly alternative energy sources. Cutting edge battery technology, shale oil and a myriad of alternative fuel technology coupled with hydro-carbon fuel over-production with the attendant glut created in the oil market have put paid to any meaningful rebound of oil prices in the future.
“What Imo and those who run her affairs must do now is to embrace a high degree of accountability and transparency, develop ingenious and workable economic policies anchored on global best practices, make drastic cuts especially on overheads/recurrent expenditure and aggressively expand internally generated revenue in a responsible and sustainable manner. That is the only way to secure the future for generations of Ndimo unborn.”
