The cumulative domestic debts of Lagos and 14 other states increased by 153.82% between December 31, 2015, and March 31, 2021, according to a study of data received from the Debt Management Office.
Each of the states experienced at least a 100% increase in less than the six years under consideration. As of March 31, the 15 states under consideration owed a total of N1.68 trillion in internal debt.
Although Lagos had the biggest domestic debt stock at N507.38 billion, Yobe state saw the greatest increase, with its domestic debt profile increasing by 1,994.08 per cent. Other than Lagos and Yobe, the other 13 states are Abia, Adamawa, Anambra, Benue, Borno, Imo, Katsina, Niger, Ogun, Ondo, Sokoto, Taraba, and Zamfara.
Adamawa State’s debt increased by 102% between December 31, 2015, and March 31, 2021, rising from N47.20 billion to N95.22 billion. Anambra State’s debt stock stood at N3.58 billion on December 31, 2015, but it had risen to N59.71 billion by March 31. This translates to a 1,567.88% rise in the state’s GDP.
Benue State’s debt stock was N39.94 billion as of December 31, 2015, however it is expected to rise to N128.25 billion by March 31, 2021. As a result, the state saw a 221.1% growth.
Between December 31, 2015, and March 31, 2021, Adamawa State’s debt climbed by 102 per cent, climbing from N47.20 billion to N95.22 billion.
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The debt stock of Anambra State was N3.58 billion on December 31, 2015, but it had increased to N59.71 billion by March 31. This equates to a 1,567.88% increase in the state’s GDP.
The debt stock of Benue State was N39.94 billion as of December 31, 2015, but it is predicted to increase to N128.25 billion by March 31, 2021. As a result, the state grew by 221.1 per cent.
Katsina State had a debt stock of N11.50 billion as of December 31, 2015, however, it is expected to climb to N58.34 billion by March 31, 2021. As a result, its debt stock increased by 4 . During the same period, Niger State’s debt stock increased by 189.91 per cent, from N21.50 billion to N62.33 billion.
Ogun State’s debt stock was N75.92bn as of December 31, 2015, but it climbed to N156.34bn by March 31, 2021, representing a 105.93% rise. Ondo State’s debt stock stood at N26.65 billion as of December 31, 2015, but it was expected to rise to N72.6 billion by March 31, 2021. As a result, the state saw a 172.42 per cent gain.
Sokoto State had a debt stock of N11.66 billion as of December 31, 2015. By March 31, 2021, this figure had risen to N38.55 billion. As a result, it increased by 230.62 per cent. Taraba State’s debt stock increased by 261.66% within the same period, rising from N27.65 billion to N100 billion.
Yobe and Zamfara saw debt growth of 1,994.08 per cent and 109.55 per cent, respectively, during the period under consideration. Yobe State had a debt stock of N2.87 billion as of December 31, 2015, but it had climbed to N60.10 billion by March 31, 2021, whereas Zamfara State’s debt stock increased from N46.28 billion to N96.98 billion during the same period.
In total, the 15 states had a debt stock of N661.89bn in December, which climbed to N1.68tn by March, indicating a debt increase of 153.82%.
However, the domestic debts of the 36 states of the union and the Federal Capital Territory Administration increased by 64.8 per cent in the years under consideration. As of December 31, 2015, the total domestic indebtedness of the 36 states and the FCT amounted to N2.50 trillion. However, by March 31, 2021, the debt had risen to N4.12 trillion.
Gbenga Omotosho, the Lagos Commissioner for Information and Strategy, said that the state’s debt-to-GDP ratio was manageable.
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 show 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 can 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.
Prof. Uche Uwaleke, a former Commissioner for Finance in Imo State, noted that the debt burden could be due to low FAAC funding to each state and the necessity to pay specific financial obligations.
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 a 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 a 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 did, however, provide state governments with a path forward, encouraging them to increase IGR, reduce reliance on federal funding, eliminate ghost workers, reduce the number of political aides, minimize overhead costs, deploy technology, and reduce corruption.