How OSUN State Suffered Financial Crisis – Gov. RAUF Aregbesola Gives Details

• What He Told City People

Talk about one state that has been grappling to survive in the face of mounting economic challenges and Osun State will pop up. Just as the state was about to complete some of its major projects a few years ago, the state began to witness a major drop in its monthly allocation and things went out of joint. It was in the midst of this that the state went into elections and won resoundingly. That Osun State is still running today is due to the grace of God and the ingenuity of the CEO of the state, Ogbeni Aregbesola who has performed a lot of re-engineering feat.

What happened to the economy of the state of Osun? For the very first time, Ogbeni Rauf Aregbesola reveald to City People a blow by blow account of what went wrong. One of the biggest challenges we have had in the last 6 years is rising expenditure. As our income was falling, expenditure was rising…More than 70% of our revenues monthly is used to pay salaries. People thought we mismanaged the Economy of Osun. No we didn’t. Something extra ordinary happened…I will tell you”.

A few weeks back when City People visited him in Osogbo he explained how the state ran into financial crisis 3 years ago. For the very first time, Aregbesola gave a detailed analysis of how the once buoyant state of Osun began to suffer losses in income, up to the point where the states economy nose dived and Osun today now has a meagre income. What really happened? Whats the inside story? Aregbesola told City People. Read on.

“One of our first acts in office when we came in was to re-engineer the finances of Osun. By the time we assumed office the state had acquired a debilitating loan, of N18.3 billion for which the state was paying about N600 million every month. And because of that, to meet salary obligations every month the state must borrow about N1 billion to augment an insolvent state.

When we came in, even in the midst of plenty, salaries were paid in fits and starts. The state was under a financial burden of loans taken with unfavourable terms. But we were able to restructure the loans on longer and more favourable terms.

Let me explain better. Before our advent, the state was servicing the short

term loan with about N300 million naira. This we restructured and brought to less than N100 million. With that move alone, we served the state about N500 million on monthly serving of loans. It is easy to forget but we won’t forget because without that, we won’t have been able to have a government. But we did that to stabilise the economy of the state. We were then able to pay salaries, on, or, before the 25th of every month.

Let me remind us. When we assumed office salaries were usually paid 1 month in arrears. What was the salary bill then? N1.3 billion, everything. And yet the state could not pay it without drawing an over draft of a N1 billion and it could not be paid as at when due. It was paid one month in arrears. Nigeria had the economic challenge then. This we reversed within 3 months. We started paying salaries as at, on or before 26th of every month. And we must emphasize on or before. This is because should 26 be a Saturday salaries would be paid on the 24th.

If 26th was Sunday salaries would be paid on 24th. We didn’t stop at that. We were sworn in Saturday 27th. We assumed office on Monday 29th. By the 3rd of December, we cleared all the affairs of leave allowances, by the middle of that month, we paid November salaries that was in arrears. By the 20th of those months, we paid December salary with 10% annual bonus that nobody has ever received in the state of Osun. We paid 3 salaries, in the December of 2010. And that was how the 13th month salary began.

We realised that given the level of neglect, we must accelerate development by taking loans from the capital market. Actually, 2 things led to this. To restructure the N18.3 billion short term loan we met, we structured with a N25 billion arrangement with First Bank to bring down the cost of servicing the N18.3 billion from over N200 million to N100 million thus saving N500 million.

That N25 billion was still a short term facility though for a longer period of time now. The first one was for 36 months. Our own was for 7 years, with First Bank, which was the maximum any bank could give you. To now convert that, to a more favourable instrument, for development, we went to the capital market.

I am explaining this in details because we must understand why we had to go to the Capital Market. This is because more than 70% of our revenue are used to pay salaries. This is outside the cost of running government. We went through the rigorous regulatory process, of going to the capital market. Many don’t know it’s a rigorous process.

Why governments don’t go to capital markets is because the rules of capital markets are very strict. You must bring all your books. You must open it to them. You must make it transparent to the capital market operators.

After going through the rigorous regulatory process, we could only take N30 billion Vanilla Fund and the N11.4 billion a year after with which we attached underdevelopment in the state.

It was used to finance 11 state of the art schools, from the Vanilla Fund and other sources we rehabilitated, and completed 230 state roads, spanning 358 kilometre, we partnered local governments to deliver 266 council roads across the state, across 30 local governments and area councils. The combined length of those roads is 216 kilometres.

Thus, we were able to construct more than 800 kilometres of quality stone-based roads with concrete drainages across the length and breathe of the state. The state has never witnessed roads of that standard in its history. People were asking: where did these people get their ideas from? That was when we started, they were amazed at our decision to make use of concrete for drainage. They called it Baba Ona meaning King of Roads. Ona, Baba Ona like Gbogan-Akoda road. We did a lot.

I may not have the big frame to say I am a big man but we have ideas in our heads Bo se wun Olorun lo se nse Ola eee. We would finish that road Gbogan to Akoda. Ase se. It is a good road by any standard. Then, Oba Adesoji Aderemi Byepass is a road that challenges any road anywhere in the world. On Garage to Ila Odo with a stop in Dagbolu that will come bout in Ikirun is a road that challenges any road in the world.

Those are our Legacy Road Projects that we call Ona, Baba Ona. Then we have done smaller roads. They are also quality roads nevertheless.

When we were campaigning we used to describe some of these our roads Ona ti on soro, ona ti ole tiro. Ona ti o nso fun e pe ma pa arare. They are roads carefully selected because they impacted the most on social and economic activities of our people. We have carried out the most comprehensive and successful social programme in Nigeria.

This is because we incorporated widows, elderly and the lunatics. No government has ever attended to lunatics in the history of Nigeria. We are the first government that will attend those who are mentally challenged, to physically challenged, and other vulnerable groups in governance. We were paying a monthly stipend to critically vulnerable elders and taking care of their health, we also took care of the destitute. We thank God for our ability to do all these.

One of the biggest challenges we have had is rising expenditure, especially wage bills, within the confines of dwindling revenue. Anybody who wants to abuse us should ask us why we are in this state, it’s not because we mismanaged our economy. No. It was because something extraordinary happened to our economy that we never anticipated.

When I came in as governor in 2010 Oil was being sold above $100 dollars. It got to as close as $22 dollars per barrel last year. Today, Oil is selling for $56 dollars. (Our own type of Oil) in contrast, my wage bill rose from N1.4 billion to N3.6 billion.

For you to appreciate what we are grappling with, it wasn’t just that our income was falling, our expenditure was rising. It’s a mismatch. It is a conundrum to the best economy, matching rising expenditure with falling income yet, we must also fulfill our obligations to those who elected us and gave us mandate to govern. We have made it a point that no one is left behind by our administration.

All of these are just a tip of the iceberg. In the process however we have learnt how to cope with adversity, unreasonable opposition, sometimes ridiculous opposition, and hostility without basis or rationality. We have fought the good fight of federation. We have laid the foundation for the development of Osun, in the next 50 years. We have no doubt in our minds that the seeds we have sewn will yield bountiful harvests for individuals and the state.

I am throwing a challenge to Economists. We are going to open our books to them. Let us capture all the total revenue of the state from 1991 to date. From the day this state was created in 1991 to date. Let us benchmark with what was done with what was collected as revenue.

Let us benchmark the revenue collected with the developments that accompanied the revenue from 1991 to date. I can tell you that no administration can match us. No administration has achieved what we have achieved in terms of physical development which this state has witnessed from November 27, 2010 to date.