Gov. Uba Sani faces $577 million foreign debt, ₦64.54 billion domestic debt burden left by El-Rufai
Gov. Uba Sani faces $577 million foreign debt, ₦64.54 billion domestic debt burden left by El-Rufai
Former Kaduna State Governor, Malam Nasir El-Rufai, reportedly left behind significant financial obligations for his successor, Senator Uba Sani, including $577.32 million in foreign debt, ₦64.54 billion in domestic debt, and additional contingent liabilities of ₦16.06 billion.
This revelation comes from a leaked document obtained from the State budget and debt service office, shared by civil society advocate Mr. Benjamin Y. Maigari in a Kaduna social media group chat.
The document, dated August 14, 2023, and signed by Daniel K. Harry in Abuja, details El-Rufai’s admission during his May 29, 2023, handover speech.
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El-Rufai’s legacy of financial commitments includes a controversial $350 million World Bank loan, structured as the Kaduna State Economic Transformation Program-for-Results [PforR].
The purpose of this loan was to enhance the business environment and strengthen fiscal management in the state. Notably, this loan was approved on June 20, 2017, but its effectiveness was delayed until April 26, 2019.
It ultimately closed on December 31, 2021, nine months behind schedule due to the loan’s inclusion in the Federal Government Borrowing Plan. The 22-month gap between approval and effectiveness resulted from the 8th Senate’s initial refusal to grant approval.
With only three months in office, Governor Uba Sani’s administration is grappling with the burden of servicing Kaduna State’s substantial foreign debts, limiting fiscal flexibility.
This poses a challenge to implementing policies that could stimulate economic growth or provide relief during crises such as the removal of fuel subsidies and rising living costs.
As of July 31, 2023, the World Bank’s financial report on the $350 million Kaduna State government loan indicates a total repayment of $9,015,352.61, comprising $5,645,671.91 in principal repayment and $3,369,680.70 in interest and fees. This translates to over ₦8 billion at the current exchange rate of ₦940 per US dollar as of August 14, 2023.
The substantial external debt burden, estimated at around $600 million, significantly impacts the state’s cash flows. The situation worsens due to repayment obligations and the high dollar-to-Naira exchange rate.
The bi-annual repayment of approximately ₦8 billion on a $350 million loan consumes a considerable portion of the state’s budget, leaving limited funds for vital public services like education, healthcare, infrastructure, and social welfare programs.
Moreover, the weakening Naira against the dollar further exacerbates the debt burden, necessitating even greater allocation of resources for debt servicing.
In light of these challenges, the state’s 2023 Approved Budget allocates ₦35.4 billion for Debt Service, a figure that may require review to accommodate current realities, potentially reducing funds available for crucial developmental projects.
These circumstances may compel the state government to implement short-term austerity measures, with potential negative consequences for citizens’ overall well-being.
To address these challenges, the Kaduna State Government may need to employ a multi-faceted approach. This approach could involve adopting prudent fiscal management practices, diversifying revenue sources, promoting investment and economic growth, and exploring debt restructuring or refinancing options to alleviate the burden of debt servicing costs.
When contacted for clarification and reaction, Muhammed Shehu Lawal, the Chief Press Secretary to Governor Uba Sani of Kaduna state, declined to comment, stating, “This is an article, not inquiries. Don’t attempt to blackmail me, please. You forwarded an already written article that was shared by you, and you want me to react? So, why do you seek my reaction then? You are not straightforward. I don’t want to react.”