IMSG and the N45 Billion loan from Zenith Bank – a constitutional legal quagmire.

On July, 5 2012, the Court of Appeal holding in Owerri finally ruled that the Governor has no constitutional authority to dissolve elected Local Government Council.

A yet to be explored ramification of the ruling is the legality of the N45 billion loan obtained by the Okorocha administration using the local government allocation as collateral.  This loan was obtained prior to the ruling of the court.  The question then is whether, a State Government alone can obtain a loan using local government allocation as collateral?  In the July 5th judgment, the Court also stated that Transition Committees are not recognized by the constitution as such they are illegal.

Now if transition committees are abnitio illegal could transition committee chairman bind the local government to a legal contractual agreement, such as a loan.

Under the past administration’s of Chief Udenwa and Chief Ohakim, transition committees were constituted and used as governments in Imo Local councils.  But never before, at least not to my knowledge that these committees were used to enter into contractual obligation on behalf of the local government with a third party.

These previous transition committees may have entered into some time of agreement with the state government for funding of projects.  Therefore their legal authority for such agreements is conferred by the state for the benefit of their respective local governments.

For instance, Imo Rural Road Maintenance Agency (IRROMA) through a State Law passed by the State House of Assembly constituted a partnership in the maintenance of rural roads in the state.  This law then enables the state government to purchase the needed equipments and later deduct the prorate share of each local government from her allocation.

But, that is not the case with the mortgage of the local government allocation to Zenith Bank. Since the loan documents has not been made public, the public is not sure who signed the loan documents.  Was the loan documents signed by the illegal T. C. Chairmen? 

If the loan documents were signed by each of the 27 legal T. C. Chairmen appointed by Okorocha, is the loan contract enforceable against the local governments of Imo State?  If the recognized Chairman of the local governments under the Law as stated by the Court of Appeal on July 5th 2012 refuses to endorse such a loan will the loan still remain enforceable?

If on the other hand, only the Governor or his representatives at the Executive Council signed the loan agreement can it then be enforces against local government allocation.

Local government is an autonomous government with regards to her funds.  State government can make deductions from local government allocation but the deductions must be legal and verifiable.  When the recognized legal authorities of a local government are excluded from endorsing and agreeing to a contract with a third party, the endorsement of such as agreement against the local government faces several legal and constitutional obstacles.

For any bank to enter into a loan agreement, where the collateral for the loan is local government allocation, at least the legal authorities of the local government must be made party to the agreement, in order for the agreement to be enforceable against the local government.

Collusion, a legal ground used by the courts to invalidate a contract agreement could be argued against Zenith Bank in this case.  Zenith Bank was aware that the administration of Okorocha dissolved elected local councils in the state. Zenith Bank was also aware that the case of the dissolution of elected Imo Local Council was in Court and yet to be decided at the time she entered into this agreement.  The 27 local government areas in Imo State could therefore argue collusion against Zenith Bank.

They could argue that Zenith Bank colluded with the administration of Owelle Rochas Okorocha to financially burden the Imo local governments and as such the loan agreement should not be enforces against the various local councils of Imo States.

We have a legal and constitutional quagmire in our hands.  Moreover the various councils may only limit their exposure to this loan to the cost of actually verifiable projects in the local council areas.

Ndi Imo, Imo must be better. This is another reason for Imo people to be vigilant and prayerful, because Imo can only be better in the hands of God.

BY

 

DR. KELECHUKWU C. OKPALAEKE

 

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