The Oyo State House of Assembly has approved the request of Governor Seyi Makinde for the issuance of a N200 billion Infrastructure Bond to refinance existing short-term loans used in financing critical infrastructure projects across the state.
The approval followed the consideration of a formal request transmitted to the House by Governor Makinde and read during plenary by the Speaker, Rt Hon. Adebo Ogundoyin.
The letter sought the concurrence of the Assembly to enable the state government to raise the bond from the Capital Market as part of efforts to restructure its debt profile and ensure the sustainability of ongoing developmental projects.
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In the letter, the governor explained that the proposed bond would be used to refinance short-term loans earlier obtained to fund strategic infrastructure projects across Oyo State, a move he said is aimed at sustaining economic growth, improving service delivery and strengthening the state’s fiscal position.
The request was accompanied by an Executive Council extract which detailed the rationale behind the proposed bond issuance.
Intervention facilities
The document explains that the existing short-term obligations, including commercial bank loans, contractor-financing arrangements, overdraft facilities, Treasury Single Account advances and Federal Government intervention facilities, currently place significant pressure on the state’s finances due to their high interest rates and refinancing risks.
The letter notes that refinancing the loans through a long-term bond instrument will fundamentally restructure the state’s debt profile, reduce annual debt servicing costs and create additional fiscal space for the government to fund capital and social development programmes.
Noting that the current short-term facilities attract weighted average interest rates ranging from 22 to 26 percent per annum, the letter says the proposed bond is expected to attract a fixed interest rate of between 17 and 19Â percent, alongside a one-off issuance fee of not more than 2.35Â percent.
The state government projected that the refinancing arrangement would generate annual interest savings of between N10 billion and N14 billion, funds that could be redirected towards infrastructure development, education, healthcare and other critical sectors.
It revealed that the major projects financed through the existing facilities include the Senator Rashidi Ladoja Circular Road, the Ogbomoso-Iseyin Road, and the upgrade of the Samuel Ladoke Akintola International Airport, Alakia and its environs.
Others are the Light-Up Oyo Project, extensive education infrastructure interventions, the remodelling of the Government House, and the reconstruction of the Ojoo-Akinyele Interchange corridor.
During deliberations on the governor’s request, members of the Assembly unanimously supported the proposal, describing it as a strategic financial decision that will benefit the state in the long run.
The Majority Leader of the House, Hon. Sanjo Adedoyin, and the Chief Whip, Hon. Gbenga Oyekola, who contributed to the debate, commended Governor Makinde for his administration’s aggressive infrastructure development programme.
The duo noted that residents across the state have continued to witness the impact of government investments in roads, education, healthcare, aviation, urban renewal, and other critical sectors.
