It may turn out that winning the March 9 election was just the easy part for governors-elect in many of Nigeria’s states who will be sworn in for the first time on May 29 this year. The bigger task will be fixing the finances of their states which are currently in a precarious state.
Amid declining allocations from the Federation Account as well as meagre Internally Generated Revenue in many of the states, the newly-elected governors will need financial ingenuity to match revenue shortfall against ballooning debts incurred by their predecessors.
The task may have just got more herculean with the National Assembly’s approval of N30,000 as the new national minimum wage, a 67 percent hike from the current N18,000. Many of Nigeria’s states have been unable to pay the N18,000 wage promptly.
From the election results declared by the Independent National Electoral Commission (INEC), BusinessDay can confirm that a total of 11 current governors will be handing over to new governors come May 29. These include the governors of Lagos, Borno, Gombe, Imo, Kwara, Nasarawa, Ogun, Oyo, Yobe, Zamfara and Bauchi.
Of these states, only Yobe State recorded total debt-to-revenue ratio of less than 100 percent despite turning out the least IGR (N2.9 billion) as of nine-months 2018, according to data obtained from the National Bureau of Statistics (NBS).
A debt-to-revenue ratio of less than 100 percent means that a state can conveniently offset its debts from its current income stream. This means Yobe State during the period under review was able to contain its debt profile below its revenue.
The remaining states have their debt-to-revenue ratios well above 100 percent. Consequently, analysts say the incoming governors in these states have to look inward and deploy other means to grow their revenue base while cutting down on their huge borrowing appetite.
“The problem of low revenue at the state government level has been a perennial problem and that is due to their over-reliance on monthly allocations from the Federal Government in running the states,” said Gbolahan Ologunro, an equity research analyst at Lagos-based CSL Stockbrokers
“With the new governors that have been elected, they would be confronted with the challenge of how they can fashion out innovative ways of generating revenues to not just meet expenditures required to run the states but to also service what can be regarded as a legacy debt from their predecessors,” he said.
Lagos State’s total debt stood at N1.04 trillion as at half year 2018, according to NBS data. This excludes the N50 billion five-year bond due 2022 the state guaranteed waste management firm, Visionscape.
With a total revenue standing at N373.5 billion as at end of September 2018, Lagos State would need twice as much as it earns as revenue to settle its huge debt, despite accounting for about 34 percent or (N283.5bn) of total IGR collected in the review period.
Similar scenario stares the two south-western states of Ogun and Oyo. Latest NBS data put the total debt owed by the states at N142.9 billion and N126 billion, respectively, far exceeding their respective revenues at N92.2 billion and N61.7 billion.
Another state whose pile of debt gives cause for worry is Imo, the Eastern Heartland. The state has a total debt of N107.5 billion waiting to be passed on to the incoming governor. This figure is more than twice the N50.8 billion generated by the state through IGR and FAAC allocation for the nine-months to September 2018.
For the north-eastern states of Borno, Gombe and Yobe, whose citizens are bracing up to welcome a new governor, the task before the incoming governors is no less daunting. The debt profile of the states stood at N85.6 billion, N55.8 billion and N37.6 billion, respectively, while their revenue as at the review period stood at N51 billion, N35.6 billion and N41.8 billion.
In Bauchi State, while Bala Mohammed, the governor-elect, may still be basking in the euphoria of his hard-won victory, a much bigger responsibility to fix a state enmeshed in huge debts awaits him. Latest data puts the state’s debt at N126 billion as at half year 2018, an excess of N80 billion compared with the N42 billion that was generated by the state in the nine-months to September 2018.
Among the four north-eastern states, only Yobe can beat its chest that it can offset its accumulated debts.
The north-central states of Nasarawa and Kogi and the north-western state of Zamfara also face revenue shortfalls amid debt profiles that stand at N95.5 billion, N58.5 billion and N82.3 billion, respectively.
“The first conclusion to draw is that these state governments depended on one-off inflows rather than stable revenue streams from taxes and levies collected on a regular basis,” said analysts at FBN Quest.
“This also goes to tell us that a state government may identify taxable revenue within its territory but still has to create the infrastructure to collect it,” the analysts said.
MICHEAL ANI
