• Monday, May 20, 2024
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Lagos, four others owe 34% of states’ ₦5.34trn domestic debt

Lagos, four others owe 34% of states’ $5.34ten domestic debt

Five states account for more than a third of the total domestic debt owed by the subnational governments in the country.

The states are Lagos, Delta, Ogun, Akwa Ibom, and Imo.

According to the Debt Management Office, the total domestic debt owed by 36 state governments and the Federal Capital Territory increased by N879.50 billion last year to N5.337 trillion as at December 2022.

This is 16.47 percent increase from N4.458 trillion as at the end of 2021.

Of the total domestic debt, Lagos owed the highest debt of N807.20 billion, followed by Delta with a total debt of N304.24 billion.

Ogun ranks third with a total debt of N270.45 billion, followed by Akwa Ibom and Imo states with a total domestic debt of N219.26 billion and N204.22 billion respectively.

Jigawa had the least debt of N43.95 billion as of December, followed by Kebbi (N61.31 billion). Others are Katsina, Nasarawa, and Ondo with domestic debts of N62. 37 billion, N71.43 billion and N77.15 billion respectively.

Muda Yusuf, director at the Centre for the Promotion of Private Enterprise, said in an interview with BusinessDay that most state governments have accumulated “huge and unsustainable debts, which are affecting their ability to meet their obligations.”

He said while some state governments have the capacity to generate a measurable level of revenue, others do not have enough revenue to run their affairs.

“Most state governments run heavy bureaucracies, and this is of great concern, given the current status of their internally generated revenues,” he said. “They end up borrowing funds for the day-to -day running of the government instead of investment. State governments must cut down the size of public services and political appointees,”

Yusuf stressed the need for state governments to build capacity to repay loans and generate substantial revenues.

According to him, some states are faced with legacy debt burdens, which are owed by past governments.

For him, there is a need to effectively monitor how state governors spend funds they borrow, as it also affects their ability to pay back.

Yusuf said: “The use of these borrowed funds must also be checked. Some governors spend funds frivolously while others spend on infrastructure which lead to improved production as well as help to generate more income for their states.

“Government is expected to use debts to fund infrastructures that will yield income for the state and not for day-to-day running of government. Governors have a lot to do in addressing revenue generation and exorbitant spendings.”

Read also: Nigeria’s total public debt hits N46.25trn

Also speaking with Businessday, Chijioke Ekechukwu, former director general of Abuja Chamber of Commerce and Industry, decried the lack of political will by some members of state Houses of Assembly.

He stressed the need for states’ lawmakers to rise to the task of holding governors accountable for debt accumulated while in service.

He said: “Most of the debts is because state governments’ borrowings are not properly monitored. It is wrong for governors to borrow at will but this is what we see when the state Houses of Assembly will not do the needful.

“The federal government must implement the sovereign guarantee, set up a committee to look into debt issues at state levels. This will make it difficult for governors to borrow. It is time governors, both past and current, were made to account for the debt they borrowed, before our states get impoverished.”

For Auwal Rafsanjani, executive director of Civil Society Legislative Advocacy Centre, it is imperative for the governors to seek ways of improving revenue generation.

According to him, most states have been in deplorable conditions for years, as they spend a huge part of their revenues in servicing debts.

He said: “Over 30 states of the federation cannot carry out infrastructural projects, due to poor revenue generation. States now borrow to pay salaries; it is a bad and serious issue that we are dealing with. Unfortunately these governors are not able to address many issues in their states, due to the weak governance structure and corruption.

“Most states are in a bad shape in terms of debt stock and internal revenue generation. Under normal circumstances, states should declare insolvency because as it is right now, many of them rely on federal allocation to meet their obligations.”