AFTER the euphoria of their electoral victories,
one of the major challenges that will confront
the President-elect, Major-General
Muhammadu Buhari (retd), and 20 or 21 new
governors is the level of debt stock the out-
going administrations will leave behind.
According to the Debt Management Office,
DMO, the Federal Government has a stock of $
6.445 billion in external debt (N1.29 trillion at
the rate of one dollar to N200)) and another
N7. 9 trillion domestic debt totalling N9.19
trillion, as of December 31, 2014. This is the
equivalent of two years budget.
The huge debt stock, if not properly managed,
can hamper the delivery of democracy
dividends.
According to external debt figures released by
the DMO, Lagos State is the most indebted
state in the country with a debt of $
1,169,712,848.65 (N233.94 billion). The state
had also borrowed N167.5 billion from the
bond market. Thus, Lagos is owing at least
N401.44 billion. This is one of the issues that
Governor-elect, Mr Akinwunmi Ambode will
confront when he takes over from Governor
Babatunde Fashola, next month.
Among the 29 states where governorship
elections were held last Saturday, new persons
will take over in 20 states, if Governor Rochas
Okorocha of Imo State is re-elected after the
April 25 supplementary elections otherwise the
number of newcomers will be 21.
The other states where fresh men will take
over are Abia, Adamawa, Akwa Ibom, Bauchi,
Benue, Cross River, Delta, Ebonyi, Enugu,
Jigawa, Kaduna, Kano, Katsina, Kebbi, Lagos,
Niger, Plateau, Rivers, Sokoto and Taraba.
Most of these states are highly indebted.
Following declining oil prices in the
international market and inability to boost
their internally generated revenue, many
states, in addition to obtaining loans and
overdraft from banks, had approached the
capital market in the last four years to raise
funds. The amount of money they borrowed
through the issuance of bonds has tripled over
the period, rising to N673 billion from N298
billion in 2011. About 12 states have issued
bonds totalling N375 billion, surpassing the
total bonds issued by all states in the country
since 1978. Lagos State tops the list of
borrowers from the bond market, at N167.5
billion. Rivers recently launched a N100
billion bond. Delta State is third with N50
billion. Others include Gombe (N30 billion),
Ekiti (N25 bn), Niger N21 billion), Bauchi
(N15 billion) and Benue (N13 bn).
As of last December, Nigeria’s total public
debt stock, according to the DMO stood at
about $67.73 billion and N11.24 trillion,
which is about N1.2 trillion higher than the
2013 figure of N10.04trillion.
A breakdown of the figures showed that
external debt, including those of the states,
was $9.71 billion and N1.63 trillion. The
Federal Government’s domestic debt was $
47.05 billion and N7.9trillion, while those of
the states stood at $10.97 billion and N1.708
trillion.
Most indebted states
Using the DMO’s external debt figures without
adding domestic debts (see tables), Lagos
tops the chart of 10 most indebted states in
the country with $1.17bn or N233.94 billion
debt. It is distantly followed by Kaduna
(N46.88 bn), Cross River (N28.29 bn), Edo
(N24.63 bn), Ogun (N21.83 bn), Bauchi
(17.51 bn), Katsina (N15.79 bn), Osun
(N14.81 bn), Oyo (N14.47 bn) and Enugu
(N13.79)
Least indebted states
Leading the states with little exposure to
multilateral and bilateral loans are Taraba
(N4.56 bn), Borno (N4.61 bn), Delta (N4.85
bn), Plateau (N6.19 bn), Yobe (N6.25 bn),
Benue (N6.62 bn), Abia (N6.76 bn), Zamfara
(N7.11 bn) and Kogi (N7.16 bn).
However, if domestic debts are added, states
like Taraba, Borno and Abia, which have not
issued bonds are the least indebted. World
Bank Consultant and Abia State Finance
Commissioner, Dr Phillip Nto, said Abia State
is reluctant to take bonds like many other
states because it would mortgage the future of
Abians.
He said: ‘’Ordinarily when you collect bond,
you are mortgaging your future because you
pay over a long period of time but our
governor is one that feels that it is not proper
to mortgage the future of the state. Abia State
is trying to come out from the mess, the
monumental difficulty which it was pushed
into in early 2000, so for the state to be
mortgaged again means that the state will be
declared insolvent. It is the reason the
governor (Theodore Orji) is not enthusiastic
about going to the bond market. But what
some other states are achieving with their
bond money, Governor T.A. Orji is also
achieving with the amount he gets from the
federation account and the IGR.’’
South-West, North-West emerge as most
indebted zones
Broken into geo-political zones, the South-
West and North-West geo-political zones are
foreign debt-most exposed zones. The South-
West is owing N304.88 billion while the
North-West has on its neck, a foreign debt of
N106.61 billion.
Least indebted zones
Conversely, the South-East is the least
indebted zone with a debt of N49.25 billion
followed by North-East (N50.20 billion).
Enugu is the most indebted state in the
South-East with N13.786 billion debt. The
legislative arm of the state government is
currently at daggers drawn with the executive
over a fresh N11 billion local debt.
The South-South zone is owing N85.46 billion
while the North-Central has to repay N56.77
billion.
Implications of FG’s debt
Analysing the Federal Government debt, the
DMO said that the debt is sustainable as
sustainability analysis showed that the debt/
GDP ratio is 11.6 per cent and Nigeria is at a
low risk of debt distress, if the reforms
embarked upon by the present administration
in key sectors were retained and fully
implemented. The bulk of the federal
government loans were concessionary with low
interests and long moratorium.
Currently, the Federal Government spends
N700 billion yearly on debt servicing
FG moves against ‘unproductive’ loans
Disturbed by the insatiable appetite of state
governments for loans, the Federal
Government, last year, directed Deposit Money
Banks not to grant fresh loans to state
governments unless they got approval and
clearance from the Federal Ministry of
Finance.
NGOZI OKONJO-IWEALA
The Minister of State for Finance, Bashir
Yuguda, said the decision is not aimed at
stalling the development efforts of the state
governments, as alleged, but to protect the
states from excessive accumulation of debts.
“The domestic debt profile of some states is
scary. The states are so much in debt that
only a small amount of their allocations get to
them at the end of the day because most
times money for debt servicing is removed
from source,”
Addressing participants in Course 23 for
security agents at the National War College,
Abuja, Yuguda said most of the states have
been experiencing difficulties in servicing their
existing debts and it would not be advisable
to allow them take fresh loans.
Rather, he stressed the need for the states to
continue to look inwards for other sources of
revenue to pursue their development
programmes.