N17B loan is in breach of law, it’s illegal, threatens to take legal action:Ardo Writes Adamawa Assembly an open Letter

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A stalwart of People’s Democratic Party (PDP) in Adamawa state,Dr Umar Ardo through an open letter has threatened to have a legal battle with the state House of Assembly over a recent approval of seventeen billion Naira loan to the executive Governor of the state.

Ardo who signed the letter alongside Alhaji Jauro Girei and Mr Hagel Gonna representing the three senatorial district of the state hold that the loan approval does not followed due process and therefore illegal.

Read the letter in detail:

Modibbo Raji House,
No.2, Lamido Aliyu Way,
Jimeta – Yola,
Adamawa State.

June 2nd, 2020

OPEN LETTER TO THE SPEAKER AND MEMBERS OF THE ADAMAWA STATE HOUSE OF ASSEMBLY AGAINST ILLEGAL LEGISLATIONS IN THE APPROVALS OF THE ADAMAWA STATE REVIEWED BUDGET 2020-2022 AND LOANS FACILITY IN THE TOTAL SUM OF SEVENTEEN BILLION NAIRA (N17,000,000,000.00)

INTRODUCTION

The kind attention of the Honourable Speaker and Members of the Adamawa State House of Assembly to the above underlined subject matter refers, please.

2. We, the undersigned, are tax paying good citizens of Adamawa State interested in the state’s affairs, specifically desirous in entrenching due process of law, transparency and accountability in governance for the general good, security and well-being of all the people of the state and its future. It is for this purpose that we find it compelling to write this Open Letter of Complaint to draw public attention to the legislative and executive branches of the Adamawa State Government on what we sincerely believe to be illegal steps taken in appropriating the Reviewed 2020-2022 Budget Expenditure and to procure Loans Facility from Fidelity Bank Plc. and Access Bank Plc. in the total sum of Seventeen Billion Naira (N17,000,000,000.00). It is our conviction that the processes undertaken by the Adamawa State House of Assembly in granting the mandatory legislative approvals of the executive’s requests on both the Reviewed Budget and the Loans Facility are in breach of due process and the law; and are therefore illegal.

THE FACTS
3. On Monday, May 18th, 2020 the Governor of Adamawa State, Rt. Hon. Ahmadu Umaru Fintiri, wrote two separate letters to the Adamawa State House of Assembly (hereinafter refers to as The House or the Hounorable House). The first letter requested the Legislative House to approve the Reviewed 2020–2022 Medium Term Expenditure Framework and Fiscal Strategy, and the second letter requesting The House’s approval to procure Loans Facility to the tune of Fifteen Billion (N15,000,000,000:00) naira from Fidelity Bank Plc. and Two Billion (N2,000,000,000;00) naira from Access Bank Plc., totaling Seventeen Billion naira.

4. The Honourable Speaker of the Adamawa State House of Assembly, Rt. Hon. Aminu Iya Abbas, on Tuesday, May 19th, 2020 introduced and read the Governor’s two request letters on the floor of The House. While instantly approving the request of the first letter “as presented” without debate, the House resolved that the second letter for the loans be referred to the House Committee on Finance, Appropriation and Budget (hereinafter refers as The Committee) for consideration, deliberation and recommendation. The Committee was then given two weeks within which to submit its report.

5. But astonishingly, The Committee returned the next day Wednesday, May 20th, claiming to have completed its assignment and so filed in its report recommending the approval of the Loans Facility. On the basis of this report, therefore, The House passed the resolution approving the Loans Facility.

OUR ANALYSIS
6. With all due respects to the Honourable House, the processes as outlined above for the legislative approvals of both the Revised Budget and the Loans Facility are in clear breach of the Standing Rules of the Honourable House, specifically Order 74(1) and (2) of the Standing Orders of the Adamawa State House of Assembly, 2012. For clarity and ease of reference, please find hereunder the provision of the said Order 74 Rule (1):
“Every bill shall receive three readings previous to its passage, which readings shall be in three different days unless the House unanimously directs otherwise and the Speaker shall give notice at each reading whether it is first, second or third”

7. The implication of the above rule is that any bill that will pass through The House must undergo three different sittings in three different days. However, the rule gives The House the discretion to suspend the strict application of the above rule under Order 43 Rule (1), but outlines the process of suspending the mandatory 3-Sittings-in-3-Days Rule when it provides that:
“No rule shall be suspended except by a vote of two third of the members voting a quorum being present”

8. It is worthy to remember that the two request letters were presented on the floor of the House on Tuesday, May 19th. While the Reviewed Budget request was instantly approved without debate the loans request was referred to the House Committee on Finance, Appropriation and Budget, and given two weeks to undertake the assignment; only for The Committee to submit its report the next day Wednesday 20th May, recommending for approval and was approved by The House accordingly. It should be noted further that throughout the proceedings of The House both on Tuesday, 19th and Wednesday, May 20th, during which the approvals were made, The House did not suspend the 3-Sittings-in-3-Days Rule requirement before granting those approvals. This in effect, therefore, means that The House breached its Standing Rules in its proceedings for granting the approvals for the Reviewed Budget and the Loans Facility as requested by the Governor. It further means that against the provision of its own Standing Rules, the Adamawa State House of Assembly conducted its legislative business, first in one Sitting and one Day on the Reviewed Budget, and then in two Sittings and two days on the Loans Facility, and not in three Sittings and three Days as stipulated by its own law.

9. In addition, in regard to the Loans Facility, The House approved the request without the Governor outlining the required details of what the loans were tied to. This was also a breach of the provisions of the Fiscal Responsibility Act, 2007 as domesticated in the State’s Fiscal Responsibility Law, 2018 (as amended). Enacted to provide for prudent management of resources, ensure Long-Term Macro-Economic stability, secure greater accountability and transparency in fiscal operations, the Act specifies borrowing conditions for all public bodies in Nigeria. To this end, Section 44 (1,2) of the Act, titled “Conditions of Borrowing and Verification of Compliance Limits”, stipulates as follows:
1) Any Government in the Federation or its agencies and corporations desirous of borrowing, shall specify the purpose for which the borrowing is intended and present a cost-benefit analysis [to the legislature], detailing the economic and social benefits of the purpose to which the intended borrowing is to be applied;
2) Without prejudice to subsection (1) to this section, each borrowing shall comply with the following conditions:
a. The existence of prior authorization in the Appropriation or other Act or Law for the purpose for which the borrowing is to be utilized; and
b. The proceeds of such borrowing shall solely be applied towards long-term capital expenditures.
And section 45 added pointedly that:
1) All banks and financial institutions shall request and obtain proof of compliance with the provisions of this Part before lending any Government in the Federation; [and]
2) Lending by banks and financial institutions in contravention of this Part shall be unlawful.

10. Notwithstanding these explicit provisions, within two days of the presentation of the request on the floor of The House, without detailed breakdown of projects that will be executed with the loans; without the existence of prior authorization for the purpose for which the borrowing is to be utilized; and despite that Adamawa State debt profile as at November, 2019 stood at a staggering One Hundred and Twenty Five Billion, Fifty Two Million, Fifty One Thousand, Two Hundred and Eighty Four Naira, Sixty One Kobo (N125,052,051,284.61) and with absolutely no effort being made by the State Government to liquidate the debt (please refer to the online publication of Sahara Reporters of 25th November, 2019 at http://saharareporters.com/2019/11/25/adamawas-debt-burden-hits-N125bn); yet the Adamawa State House of Assembly, in breach of its own Standing Orders and the Fiscal Responsibility Act as domesticated, swiftly approved a whopping Seventeen Billion naira Loans Facility on very unfavourable terms.

11. To this end, it should be noted that the content of the Governor’s letter to the House for the loan facility from Fidelity Bank Plc. reads inter-alia:
“Mr. Speaker, the State Executive Council at its 5th (2020) Meeting held on 13th May, 2020 considered and approved the securing of the sum of Fifteen Billion Naira (N15,000,000,000.00) Only loan facility from Fidelity Bank Plc. for a tenor of Fourty-Eight Months at 13% interest and 0.5% management fee…”
It is critical to note the following:
i. 13% of N15,000,000,000.00 = N1,950,000,000.00.
ii. 0.5% of N15,000,000,000.00 = N75,000,000.00.

12. Mr. Speaker and Honourable Members, as we are sure you all know, neither the Central Bank Monetary Policy and Guidelines nor any existing financial regulation, or any extant law in Nigeria recognizes the charging of management fees on loans. Similarly, the Central Bank of Nigeria recently slashed lending interest rate to 12.5% with the aim of reviving the country’s economy that is battered by the COVID-19 pandemic and the collapse of oil prices in the world market.

13. Thus, in effect, the “instant approval” given by The House to the Reviewed Budget Bill in breach of its Standing Rules and the Loans Facility approval given in breach of its Standing Rules and the Fiscal Responsibility laws invariably rendered both approvals unlawful. In essence, therefore, unless appropriately represented and duly passed by The House, Adamawa State will be operating an unlawful budget for the 2020-2022 fiscal years and expending unlawful loans.

14. Honourable Speaker and Members of our legislature, outlined above are the facts and our understanding of the legislative processes in the approvals of the Reviewed Appropriation Bill and the Loans Facility vis-à-vis due process oflaw.

OUR GROUNDS OF COMPLAINT

i. Without duly passing the Reviewed 2020–2022 Medium Term Expenditure Framework and Fiscal Strategy Bill by the Honourable House of Assembly, Adamawa State will be operating an illegal budget, which is against the standards of a State governed under law;
ii. The jolt approach adopted by The House in approving the Loans Facility without due regard to its Standing Orders, the Fiscal Responsibility Act (Law) and the State Budget makes the entire process of securing the loan facility illegal, fraudulent and marred by irregular practices;
iii. The 0.5% Management Fees which amounts to Seventy Five Million Naira (N75,000,000.00) is unknown to law thereby making it illegal and thus constitutes an act of corruption;
iv. No single project was identified in the 2020 budget that is to be executed by the Loans Facility, even as the loans were not meant to finance any deficit in the 2020 Appropriation Law of the State – hence securing the Loans Facility is an untoward act against the state;
v. It is an abysmal collusion and an act of unethical practice in negotiating the Loans Facility at 13% interest rate instead of 12.5% as approved by the Central Bank of Nigeria;
vi. That there is no project with ascertainable source of repayment means that the Loans Facility is not self-liquidating, thereby placing additional indefensible debt burden on the people of Adamawa State; and
vii. In the final analysis, what this entire apparent hurry to borrow, squander and pass forward the responsibility for repayment ultimately amounts to is putting Adamawa State’s future in a deep economic and financial hole.

D. CONCLUSION

16. In the greater interest of public service, we urge the Adamawa State Government to represent its Reviewed Budget to The House for due appropriation and also halt forthwith the procurement of the Loans Facility, since the legislative processes of both approvals are in breach of the law, and to also redeem the state from being mortgaged by indefensible debts acquired through unlawful means. Yes, economically, we can borrow, but we must be +lawful and technical about it. This is a time for innovations; government must simply be innovative in governance, and must lay out to the conviction of the public technical logic of its borrowing schemes. In this global hour of economic peril, nothing of this nature must be done unaccountably.

17. While we avail ourselves for any further clarification, please note that failure to act applicably will result into a court action against The House and the Adamawa State Government. Please accept our esteemed high regards. Thank you.

Signed:
DR. UMAR ARDO
(Adamawa State Southern Senatorial District)

Alh. Jauro Hammanjoda Abba Gire
(Adamawa State Central Senatorial District)

Mr. Hagel Gomna
(Adamawa State Northern Senatorial District