The cumulative domestic debts of Lagos between December 2015 and March 2021, has spiked to N507.38 billion, making it the state with the highest domestic debt stock, analysis of data obtained from the Debt Management Office has shown.
The analysis also showed that cumulative domestic debts of Lagos and 14 other states rose by 153.82 per cent.
Although Lagos had the highest domestic debt stock, Yobe state recorded the highest leap as its domestic debt profile rose by 1,994.08 per cent.
Apart from Lagos and Yobe states, the other 13 states are Abia, Adamawa, Anambra, Benue, Borno, Imo, Katsina, Niger, Ogun, Ondo, Sokoto, Taraba, Zamfara.
As of December 31, 2015, the debt stock of Lagos State stood at N218.54bn, but by March 31, 2021, it had climbed to N507.38bn. This represents 132 per cent increase within the time-frame.
As of December 31, 2015, Abia State’s debt stock stood at N33.53bn, but by March 31, 2021, it had increased to N70.57bn; thus, rising by 110.47 per cent.
The debt stock of Adamawa State rose from N47.20bn to N95.22bn between December 31, 2015 and March 31, 2021, resulting in a debt increase of 102 per cent.
As of December 31, 2015, the debt stock of Anambra State stood at N3.58bn, but it increased to N59.71bn by March 31. This means that the state recorded a leap of 1,567.88 per cent increase.
As of December 31, 2015, Benue State’s debt stock was N39.94bn, but it increased to N128.25bn by March 31, 2021. Thus, the state recorded an increase of 221.1 per cent.
Within the same period, the debt stock of Borno State increased from N22.34bn to N91.86bn, resulting in a 311 per cent debt increase.
As of December 31, 2015, the debt of Imo State stood at N71.74bn. However, by March 31, 2021, it had gone up to N149.89bn. This represents 108.94 per cent increase.
As of December 31, 2015, Katsina State had a debt stock of N11.50bn, but it increased to N58.34bn by March 31, 2021. Thus, its debt stock rose by 407.3 per cent.
Within the same period, the debt stock of Niger State rose from N21.50bn to N62.33bn; thus, recording an increase of 189.91 per cent.
Ogun State’s debt stock was at N75.92bn as of December 31, 2015, but it increased to N156.34bn by March 31, 2021, thereby recording an increase of 105.93 per cent.
As of December 31, 2015, the Ondo State debt stock stood at N26.65bn, but it had increased to N72.6bn by March 31, 2021. The state, therefore, recorded an increase of 172.42 per cent.
As of December 31, 2015, Sokoto State had a debt stock of N11.66bn. This had increased to N38.55bn by March 31, 2021. It, therefore, recorded 230.62 per cent increase.
Within the same time-frame, Taraba State debt stock rose from N27.65bn to N100bn, thus making an increase of 261.66 per cent.
Yobe and Zamfara recorded debt increases of1,994.08 per cent and 109.55 per cent respectively within the time under review.
As of December 31, 2015, Yobe State had a debt stock of N2.87bn, but it had increased to N60.10bn by March 31, 2021, while Zamfara State’s debt stock rose from N46.28bn to N96.98 within the same period.
In total, the 15 states as of December had a debt stock of N661.89bn, which increased to N1.68tn by March, signaling 153.82 per cent debt rise.
However, in general, the 36 states of the federation and the Federal Capital Territory Administration recorded an increase of 64.8 per cent in their domestic debts within the years under review.
The total domestic debts for the 36 states and the FCT stood at N2.50tn as of December 31, 2015. However, by March 31, 2021, the debts had gone up to N4.12tn.
‘Low Debt to GDP Ratio’
Lagos Commissioner for Information and Strategy, Gbenga Omotosho, told one of our correspondents that the state was within reasonable debt-to-GDP ratio.
He said, “It is when you check your debt-to-GDP ratio that you know whether your debt is too heavy or not. The World Bank and the international best practices shows that your debt ratio to your GDP must not be more than 40 per cent.
“Lagos is not close to it at all. Lagos is within 13 and 14 per cent. So, Lagos has so much room to borrow more because it has the capacity to pay and that in itself is not a problem.
“What is the problem is what we do with it. Lagos is not borrowing to pay salaries; Lagos is borrowing for projects, projects that would generate employment, projects that will reduce the suffering of people, projects that will improve the social economic position of the state.”
A professor of economics at the Olabisi Onabanjo University Ago-Iwoye, Ogun, Prof. Sheriffdeen Tella, faulted the states for borrowing for consumption.
He said, “Even at the federal level, we have not been able to see the positive effects of borrowing because they are borrowing for consumption, and not for development.
“They will say that they are borrowing for development, but you find that is not the case. The states don’t have long term plans just like the federal government; they just feel there is need to borrow and so they borrow.
“Instead of investing the money in projects that will bring returns, they are not doing so. They are also borrowing to acquire money for political purpose rather than economic purposes.
“Each state has areas they can develop to increase their internally generated revenue, but instead, they rely largely on the allocations from the Federal Government. This is not good enough.”
Professor of economics and public policy at the University of Uyo and the Chairman of the Foundation for Economic Research and Training, Prof. Akpan Ekpo, stated that if a state was unable to generate enough internally generated revenue to pay back its debts, it could lead to higher debt burden.
He said, “First, we need to assess if these states have the capacity to pay back the debts. For example, Lagos State, which is heavily indebted, may have the capacity to pay back its debts because it generates a lot of IGR.
“However, many Nigerians states do not generate enough IGR to even pay salaries. When they incur debt, it is more burden on these states.”
A former Commissioner for Finance Imo State, Prof. Uche Uwaleke, stated that the debt burden may be as a result of low FAAC allocation to each state and the need to meet up with certain financial responsibilities.
He said, “I think the situation can be blamed on the drop in FAAC allocation as most states in the federation depend on FAAC distribution.
“The drop in FAAC was due largely to collapse in oil revenue in 2015/16 and drastic fall in government revenue again in 2020 due to COVID-19. Recall that the Nigerian economy was in recession during these periods.”
He said revenue shortfall in many states was aggravated by weak revenue base and poor IGR effort.
Uwaleke added, “On the spending side is the fact that many of the heavily indebted states have huge recurrent expenditure involving personnel costs and overheads.
“The periods of economic recession made it difficult for many states to downsize civil servants in order not to create social crisis.
“So, against the backdrop of unexpected shortfall in FAAC and IGR, many states resorted to borrowing especially from banks despite the bailout programmes executed by the Federal Government.”
He, however, suggested a way forward for state governments, advising them to boost IGR, lessen dependence on federal allocation, eradicate ghost workers, lessen number of political aides, cut overhead costs, deploy technology and minimise corruption.Follow us on social media