Domestic debts of Nigerian states: What is new in the latest data?

The latest data published by the National Bureau of Statistics (NBS) shows that the 36 states of the federation owed N3.809 trillion as domestic debts by March 31, 2019. At the rate of 360/$, the 36 Nigerian states owed $10.6 billion as domestic debts at the end of the first quarter of 2019. This implies that in the first three months of 2019, domestic debts increased by N883.5 billion or 3.3 percent.

When compared with December 2016 when states owed N2.81 trillion or $7.79 billion, the 36 states of the federation grew their domestic debt portfolio by 36 percent or borrowed additional N1.004 trillion or $2.8 billion from the domestic creditors. In recent days, arguments for and against the rising debts among states have staged a comeback with the proponents and opponents justifying their positions as to what level of debt is sustainable for states.

What is new in the latest data?

First, states with low domestic debt portfolios are increasing their domestic debt profiles, albeit slowly. Take for instance, as at December 2018, the ten states with the highest domestic debts cumulatively had N1.96 trillion representing 53 percent of the total local debts owed by the 36 states. Fast forward three months later, that is by March 2019, the same ten states with the highest local debts collectively owed N1.97 trillion , which amounted to 52 percent of the N3.81 trillion local debts owed by the 36 states of the federation. In other words, the share of the biggest ten states dropped in March 2019 compared with their positions in December 2018.

By size, Lagos owed N530.24 billion domestic debt in December 2018 and that increased to N542.23 billion in March 2019, representing an increase of 2.26 percent during the three-month period. Rivers’ local debt remained unchanged at N225.59 billion. Delta State owed N228.81 billion in December 2018 but that decreased by 2.34 percent to N223.44 billion in March 2019. In other words, the Delta State Government paid N5.4 billion to local creditors in the first quarter of 2019.

Akwa Ibom State owed N199.77 billion in March 2019, a marginal 0.56 percent increase over N198.66 billion in December 2018. Cross River paid local creditors N703.51 million indicating that its domestic debts as at March 2019 at N167.25 billion was 0.42 percent lower than N167.96 billion in December 2018.

In the first quarter of this year, the State of Osun paid local creditors N398.37 million, leaving its domestic debts at N147.70 billion in March 2019 as against N148.10 billion in December 2018, a decrease of 0.27 percent.

Bayelsa State grew its domestic debt by 2.53 percent from N130.04 billion in December 2018 to N133.34 billion in March 2019. Kano State borrowed additional N4.22 billion or an increase of 3.61 percent in its local debt from N117.08 billion in December 2018 to N121.31 billion as at March 2019. Ekiti State’s domestic debt remained unchanged at N118.01 billion in March 2019. Plateau State paid N1.78 billion to reduce its domestic debt by 1.77 percent to N98.59 billion as at March 2019 from N100.37 billion in December 2018.

Outside the top ten most indebted states, some other sub national governments experienced double digit growth in their domestic debts or even more. Katsina State topped the list of such states. In the first three months of this year, the Katsina State Government borrowed N36.2 billion or an average of N12.08 billion per month, leading to 117.48 percent rise in its domestic debt, which moved from N30.85 billion in December 2018 to N69.1 billion in March 2019.

Gombe State sourced additional N4.52 billion from local creditors which pushed its domestic debt to N76.89 billion, representing 21.4 percent increase when compared with N63.3 billion three months earlier. Ondo State recorded 16 percent increase in its domestic debt , which means it borrowed N7.84 billion from domestic creditors and thus pushed its new local debt level to N57 billion in March 2019 as against N49.1 billion in December 2018.

Kogi State’s domestic debt was higher by 13.84 percent or the state government sourced additional N11.75 billion from local creditors leading to a new local debt at N96.7 billion as against N84.92 billion in December 2018. And Kaduna State increased its domestic debt by additional N8.6 billion or an increase of 10.12 percent to have new domestic debt level at N93.20 billion in March 2019 compared with N84.64 billion in December 2018.

Other states recorded single digit growth in their domestic debt levels which ranged from 1.03 percent to 8.7 percent. The states are Kwara, Bauchi, Enugu, Jigawa, Adamwa, Nasarawa and Niger.

On the other hand, Rivers, Ebonyi , Anambra and Ekiti maintained the same domestic debt levels between December 2018 and March 2019 while Abia, Sokoto, Yobe, Delta, Plateau, Ogun, Imo, Edo and Benue reduced their domestic debt portfolios during the first quarter of this year.

Debt to IGR ratio

So, if the states of the federation were to repay their domestic debts through internally generated revenue (IGR) only, how long will it take each state to repay all the debts? Using the December 2018 IGR figures, the states with the longest periods of repayments based on this metric are Ekiti, Adamawa, Osun, Kebbi, Borno, Nasarawa, Taraba, Gombe, Bayelsa, Katsina, Bauchi and Cross River. It will take a minimum of ten to eighteen years to offset their domestic debts if the repayment is through IGR only.

On the contrary, the states with the shortest payback periods are Rivers, 2 years; Sokoto, 1.9 years; Anambra, 1.7 years; Lagos, 1.4 years and Ogun, 1.1 years.

Local debt per capita

If the local debts were to be shared among the residents of each state, how much will each resident pay? Nigerians domiciled in Bayelsa State would pay N60,257 each, and this is the highest in the federation. Lagosians would pay N44,608 each. Nigerians resident in Cross River would pay N44, 532 each. Deltans would each pay N40,737 while Akwa Ibomites would each pay N37,700 each.

Others are those living in Ekiti where each resident would pay N37, 216 each. Nasarawa residents would pay N36, 733 each. Osun residents would pay N32, 410 each while Rivers’ residents would pay N31,955 each. These are the five states where residents have the highest domestic debt burden and the debt per capita in each state is higher than the recently approved national minimum wage of N30,000 per month as well as the national domestic debt per capita at N20,692.

At the bottom of the pyramid of the local debt per capita are the residents of Kano, Katsina, Yobe, Niger, Sokoto, Jigawa and Anambra states. Each resident in the aforementioned states would pay less than N12,000 if their domestic debts were to be fully paid by IGR only.

 

TELIAT SULE