The loan which will be sourced from the World Bank is the first major approval of such facility for any state government by this administration.
Addressing State House correspondents after the meeting, Minister of Power, Works and Housing, Babatunde Fashola explained that the loan was not entirely a new one as part of it had been collected during the immediate past administration.
He said, however that the delay in approving the balance of the loan was due to partisan political differences as Lagos State was being controlled by a different policical party other than that of the government at the centre.
According to him, the loan was approved in 2010 by the Federal Government with an initial moratorium of 10 years and a repayment period of 40 years.
He regretted that due to the branding of Nigeria as the largest economy in Africa at the moment, the terms and conditions of the loan had changed with a reduction of moratorium period to only five years, repayment period to 25 years and an imposition of 2.5 percent interest rate.
“The point to make is that this is not a new loan, it’s a segment if a programme of developmental initiatives and it was approved in 2010 with a total sum of $600 million for Lagos State to be disbursed in tranches of 200 million each year starting from 2011-2013. But it suffered delays as a result of partisan political differences in the last dispensation. After the first tranche was disbursed, there was a freeze on the second tranche.
“The initial agreements we had with the World Bank was a 40-year loan, a 10-year moratorium, 0.5 percent interest. But because of the delays that subsequently characterised the partisan interference that took place, our profile as a nation also changed; we had become a bigger economy so money was being lent to us not now as a highly indebted nation anymore. So by the time this one was approved now because of the delays, we had lost the opportunity of 40
years as it is now a loan of 25 years, the moratorium has reduced to five years instead of 10 years. The interest rate had gone up to 2.5 percent
“But what is still heart-warning about it is that it helps to finance infrastructure. When we look at road construction and the value chain that people benefit from it, labourers, those shops that sell iron rods, artisans, craftsmen, that means, really globally, economies are being reflated and infrastructure defines how big a nation can grow; it is the defining line between poor and rich nations.”
Fasola in whose era as Lagos State governor the first tranche of the loan was received, however, expressed gratitude that the government of the day at the centre had given approval for the loan to complete the numerous roads and other projects that were started.
He also noted that the resolve by the World Bank to provide the money was a testament that the foremost financial institution had confidence in the Federal Government and its current fiscal measures.
“It’s is heart-warming that this administration has taken it on, and again fast track it so that the Lagos State government can continue its developmental programmes of infrastructure renewal; taking people out of poverty, reducing inequality because that’s the way to really distribute wealth in a society.
“And that the World Bank has had the confidence now to lend sums in tantamount to sub-national government is a testament of financial discipline, strong governmental structures and the establishment of institutions, rather than the World Bank writing programmes for those states,” the minister said.
Fielding questions from correspondents , Fashola disclosed that the immediate past Finance Minister , Dr Ngozi Okonjo-Iweala had confided in him that the second tranche of the loan was frustrated because some PDP governors were complaining that only the then opposition states were benefiting.
Asked whether partisanship interpretation would not equally be given to the current approval, the Minister replied that as at the time the first approval was given, Lagos State was duly qualified for the loan.