The Oyo State House of Assembly has approved a N100 billion loan facility from United Bank for Africa (UBA) Plc to finance infrastructure projects and other development initiatives across the state’s 33 local government areas.
The lawmakers also approved a separate N300 billion facility to refinance an existing contractors’ finance arrangement obtained by the state government from Access Bank.
The approvals followed a request by Governor Seyi Makinde in a letter addressed to the Speaker of the House, Adebo Ogundoyin, and read during plenary on Wednesday.
According to the lawmakers, the N100 billion loan will provide additional funding for critical infrastructure projects, accelerate the completion of ongoing developments and sustain the state government’s infrastructure programme.
The Assembly cited projects such as the Ladoke Akintola University of Technology (LAUTECH) Teaching Hospital in Oyo town, the Rashidi Ladoja Circular Road and the Ido-Eruwa Road as examples of ongoing initiatives requiring sustained investment.
The lawmakers argued that completing the projects would improve connectivity, expand access to public services, create employment opportunities and stimulate commercial activities across the state.
N300bn refinancing to reduce interest rate
The separate N300 billion facility is designed to transfer the state government’s existing contractors’ finance arrangement from Access Bank to UBA.
The existing facility reportedly attracts an interest rate of 26 per cent, while the proposed refinancing arrangement would reduce the rate to 22 per cent, representing a four-percentage-point reduction.
The lawmakers said the arrangement would help lower borrowing costs, consolidate the state’s contractors’ finance obligations under one financial institution and ease its financing burden.
The refinancing arrangement is intended to restructure an existing obligation rather than constitute an additional N300 billion in fresh borrowing.
Loan repayment terms
The new N100 billion loan will attract an interest rate of 22 per cent, subject to review in line with prevailing money market conditions, and a repayment period of 48 months.
The terms also include a management fee of 0.25 per cent per annum and an annual advisory fee of 0.5 per cent, both calculated on the outstanding balance.
Under the arrangement, repayment of the principal and interest will be subject to a three-month moratorium. However, interest accruing during the moratorium will be repaid alongside the fourth, fifth and sixth instalments.
The terms mean that the overall cost of the new facility will include interest and applicable fees in addition to the principal amount borrowed.
Lawmakers defend infrastructure spending
Contributing to the deliberations, the Deputy Speaker, Abiodun Fadeyi, alongside Gabriel Adebayo, representing Ibadan North II; Olorunpoto Rahman, representing Oyo East/Oyo West; and Sunkanmi Babalola, stressed the importance of sustained infrastructure investment.
They maintained that timely completion of ongoing projects would ensure that public funds already committed to development initiatives translate into tangible benefits for residents.
The lawmakers also argued that improved roads, healthcare facilities and other public infrastructure would support economic growth, facilitate the movement of people and goods, and strengthen commercial activities across Oyo State.
With the Assembly’s approval, the proposed financing arrangements provide for a fresh N100 billion borrowing facility for infrastructure development and the refinancing of an existing N300 billion contractors’ finance obligation at a lower interest rate.
The financial implications of the arrangement will depend on the agreed terms, applicable fees, repayment schedule and any subsequent changes to the interest rate.
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