How Udom's Debt Kills A'Ibom Businesses

UbongAbasi Ise

It is surprising to observe that business associations, market and transport unions are not making any noise about the recent report by the Debt Management Office (DMO) which revealed that Akwa Ibom State government, as at September 2020, owed Banks a whopping N239.2 billion. It seems that the business community in the state is unaware of the bad implication or a deleterious blow this debt burden could deal on the growth of their private enterprises. Maybe they are just trying to remain silent over a forbidden knowledge. 

 How does governments debt burden affects businesses and economy? Here, the government is expected to be servicing and repaying debt with revenue it generates through taxations and allocation. If the debt stock is highly accumulated, then there is the tendency for government to increase the Internally Generated Revenue (IGR) to meet up with its debt obligations. By increasing IGR, it means taxes on private investments would skyrocket. This explanation could not be far from the all-time record in the rise of the Akwa Ibom States IGR as prided by the Chairman of the states Internal Revenue Service, Mr. Okon Okon, when he, in August 2019, announced that the state recorded N20.4 billion as the amount generated internally in the first half of 2019 alone. To confirm the state governments zeal in overtaxing the private businesses, apparently to escape the debt trap, the state Commissioner for Finance, Mr. Linus Nkan, disclosed  in January 2020 that the state government had pegged the target of IGR for 2020 at N100 billion. What this implies is that bulk of internal revenue would be generated for the government by the struggling businesses in the state with greater percentage apparently going for debt servicing. But man proposed, Covid-19 disposed, hence 2020 fiscal year missed internally generated N100 billion that could have been the all-time highest record.

 No wonder the President of the Akwa Ibom State Hotels Proprietors Association (AHPA), Sir Aniefiok Alexander, was crying out during a media interview in March 2020 saying the hoteliers in Akwa Ibom were being taxed by about 13 government agencies in the state. This claim was not limited to the hospitality sector alone; market traders and shop owners were also bemoaning same experience. This could explain the surge in the prices of goods and services in the state because when businesses face a situation of multiple taxations, the leeway is to hike the price of available services and items in order to recoup bits of capital lost in levies and to make considerable profit. 

 Heavy taxation induced by state debt has a way of badly attenuating the local economy. Barr. Clifford Thomas, while speaking on the Passion FM morning programme of Thursday August 20, 2020, was very explicit in illustrating how multiple taxations on transporters alone could weaken the local economy of the state. According to him, assuming we have 10,000 keke riders and minibus drivers who pay an average of N300 per day; lets assume we have N3 million. You can imagine what N3 million would do to the local economy everyday when that N300 is not paid to whoever.  

Indeed, Mr. Thomass analysis offered a window to view how general taxation of businesses could mob up capital in an economy and then repatriate them to non-indigenous creditors, thus leaving the state private sector weakened for wants of capital.  It would be recalled how Udom Emmanuel-led state government obtained N10 billion loan from the United Bank of Africa (UBA) with an interest rate of 14.5% per annum to fund the construction of 29km Etinan-Ndon Eyo road project. The state government awarded the contract to Wizchino Engineering Limited, a Chinese company, that would turn out to be repatriating that borrowed fund to their homeland, leaving behind a 14.5% interest for the state to be settling the lending bank over the amortization period. 

Again, Clifford Thomas, while speaking with selected media practitioners in November 2019 following the unveiling ceremony of the Foundation for Civic Education, Human Rights, and Development Advancement, FoCEHRaDA, said Akwa Ibom State Government was making monthly debt repayment of N700 million which is an arrangement expected to span over 23 years. But before then, despites the state government not making public the debt profile of state, Barr. Thomas said the administration of Mr. Udom Emmanuel was making a monthly repayment of N5 billion of the existing debt until it was later restructured into a long term Bond.

According to him, The debt inherited by Governor Udom Emmanuel administration from the previous government has not been made public. Information from a reliable source states that the State was making a monthly payment of N5 Billion to repay existing debt, but that it has been negotiated into a long term Bond where the state has to make a monthly payment of N700 Million over a period of 23 years. 

 Indeed, this restructured debt has multiple capabilities of killing both the present and the future economic opportunities of the state. Of course Thomas was stressing that this restructured debt makes children yet unborn, to be indebted for the callousness and indiscretion of a handful of persons. In Akwa Ibom, development appears to be misspelled. Reasons for taking loans seem not to be crucial or convincing enough.  Recall that before the 2019 elections, the Udom Emmanuel-led administration swiftly borrowed N3.5 billion from Zenith Bank, supposedly to install CCTV security cameras on the streets of Uyo, the state capital city. Till today, the state government has not shown Akwa Ibom people one camera it installed. All that is left for the state is bad debt that could only contributes in sucking up the resources of the state well into the future. 

 In a sense, governments act of taking of loan is not bad in totality. Government goes aborrowing to fill the vacuum created by the fiscal gaps in the proposed expenditure. Loan is presupposed to augment available resources meant for development within a period of time. But excessive accumulation of past debt is condemned to encroach on future resources by acting as future tax and this could place successive governments in a vicious cycle of underperformance because economic growth would consistently be sacrificed for the payment of debt. 

It is quite questionable to see Akwa Ibom with large allocation from the federation account falling amongst the first three states on the log of the highest indebted in the country. As observed, development recorded on ground by Mr. Udom Emmanuel government seems to incommensurate with over N1.6 trillion reportedly accrued to the state since 2015. Citizens have come across reports that the Federal Government had given the state over N50 billion of Paris Club refund while President Muhammadu Buhari also signed about N78 billion project refund for the state in 2019. 

The government of Akwa Ibom State under Mr. Udom Emmanuel owes the citizens of the state both respect and accountability. The debt situation of the state demands a forensic financial audit. The state government has no excuse not to make public the debt profile of the state. This writer hereby call on human rights organizations, business organizations and concerned citizens to rise up and petition appropriate anti-graft agencies and exploit legal options to ensure that Udom Emmanuel and his appointees give account on how they  use Akwa Ibom resources to run the state. The time could be now, later or after they leave office in 2023. 

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