OSUN DEBT: THE BALANCE AND CRITICS

The former governor, State of Osun now Interior Minister of the Federal Republic of Nigeria, Ogbeni Rauf Aregbesola has affirmed that his administration Social Investment Programmes didn’t over-burden the state financial strength. He borrowed constructively in OSUN: The FORMER Governor of Osun State, Rauf Aregbesola, says a state can “borrow constructively” in order to bridge its infrastructure deficit. ”The reality is that where do you get resources to build for today? There is something that is called constructive borrowing and there is destructive. Infrastructure financing typically involves high levels of debt (on average c.75%2of enterprise value) with the remainder in equity. It is on record that Aregbesola has dominated infrastructural projects financing in Osun State.
Aregbesola did not use debt to fund any of Osun social investment programmes. The loan Osun took at the capital market was directed at Osun infrastructure and human capital development. Aregbesola understands that eeconomic growth is a function of more productive capital investment, and more and better trained employees (or in economists speak — human capital). But, in fact, there are many governments (taxpayer)-funded infrastructure projects that provided benefits exceeding their costs by sizable factors. In developing economies like Osun State, the governments resort to borrowing in order to finance schemes of economic development. Government or what is also called public borrowing becomes necessary because taxation alone cannot provide sufficient funds for economic development. Besides, too heavy taxation has an adverse effect on private saving and investment.

Aregbesola made a statement recently while debunking some of the rumours by critics associated with the debt profile of the State during a virtual colloquium organised by a group of individuals in commemoration of the Osun former helmsman 63rd birthday tagged: *Government Unusual:* _**_Innovative Economic Solutions to Unlock Mass Prosperity**_
The Osun former governor said, “there is this (chorus of) debt, debt and debt: a motivated people can never be in debt regardless of the size and I must correct something, we did not use debt to fund any of our social programmes”
The bulk of the debt that was overhanging now is the debt incurred on overdraft of salaries, the loans we took from the capital markets were directed at development – physical and human.

“And I must say, we have liquidated the SEC loan which will called vanilla bond by the end of last year, we are liquidating Sukuk bond 11.4 Billion Naira by the November of this year.” “So, what it means is that in terms of the actual debt we took to fund development, there is no issue at all”

” The issue we have is in the money we had to take from the commercial bank which we had transferred through the instrumentalist of the governors’ forum and the other measures that came into helping government by our president to absolve the bond as federal government bond with a long term of nineteen-twenty years which we are now paying” “By the time we finish paying the Sukuk bond by October-November this year, the State will be relieved and don’t forget, if as it is said, we are doing so well in a lot of things, definitely, it will translate into IGR. And that will help”
Critics of Aregbesola’s administration in Osun State do not discuss the positive benefits of the capital projects executed with Osun loan. But rather they discussed the negative side of Osun debt even when the debt has been paid. Aregbesola borrowed constructively to finance major capital projects in Osun from 3 High Schools in Osogbo, One in Ilesa, Ife, Iwo, Ejigbo, Ede. Ikere, Ikirun, and Ila-Oragun. Critics do not discuss how Aregbesola bridged infrastructural gap in Osun State. Critics always focus on negative side when discussing Osun debt. Critics do not discuss the progress Aregbesola made in infrastructural development in Osun.

Aregbesola borrowed constructively to develop Osun State. A state can “borrow constructively” in order to bridge its infrastructure deficit. The fact is that borrowing helps to provide needed resources these days as long as it is constructive. Most economists agree that borrowing to cover current operating costs of government and involuntary transfer payments are harmful because, in part, it puts an obligation in the form of higher taxes on future generations many of whom are unborn.

Where do you get resources to build for today? There is something called constructive borrowing and there is destructive. If you borrow to buy a vehicle, you’re putting your-self in trouble. But if you borrow to build a house, the house will appreciate and then, you can sell it, especially if you are in trouble. So, we have heard this argument before. The State of Osun in southwestern Nigeria raised the first sukuk bond constructively in Nigeria worth ten billion naira (some $62 million) from the capital market to fund educational development. Today Osun Sukuk is driving national fund for development projects. It was the first of such step by Africa’s biggest economy. Former Governor Aregbesola was aware that Islamic financial instruments such as sukuk have been used to finance infrastructure projects in countries like Malaysia and Indonesia, and in the Middle East, and could attract investors from such countries. The former Governor knows that Islamic finance requires a clear link with real economic activity and transactions have to relate to a tangible, identifiable asset, which comes in handy in the case of infrastructure financing.

Aregbesola used the opportunity provided by the colloquium to thank President Muhammadu Buhari, for his encouragement and for motivating him far before he joined his cabinet. “President Muhammadu has been encouraging me, motivating me and pushing me to my best, particularly in the line of concentrating on the mass of people without jeopardising the interest of the minority and that is key”
The Interior Minister also eulogizes Asiwaju Bola Ahmed Tinubu who he described as the hero of whatever he did or achieved as Governor of Osun.

“I can’t forget his contributions to making me a good public administrator, he takes all the glory apart from God and with the people whom I worked with under him, people like the present Vice President, Professor Yemi Osinbajo, Yemi Kadoso, Dele Alake, Wale Edun and a couple of other brilliant people who did not only make our governance of Lagos successful but rallied around me as the Governor of Osun”, he concluded.