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States’ external debts spike to $2.82bn on infrastructure financing


The external debt profile of state governments in Nigeria increased to $2.82 billion (N467bn) by December 2013, up from $2.38 billion by December 2012, data obtained from the Debt Management Office (DMO) shows.

The new level of indebtedness is 18 percent higher than the corresponding debt level as at December 2012 and 30 percent higher than the figure in the comparable period of December 2011.

A glance at the external debt table shows that Lagos State, the commercial nerve centre of the nation, leads with $938 million, and is trailed closely by Kaduna at $241 million; Cross River, $122 million; and Ogun State, $117 million. The four states collectively control 50 percent of the debt owed by the 36 states and FCT as at the end of December 2013.

States are planning to pay for upgrades in infrastructure such as roads and railways, while also seeking to boost spending to end power cuts and sustain growth, forecast to be 6.7 percent this year, according to the World Bank.

On a yearly basis, eight states grew their debt profiles by double digit. In this category are Lagos (53 percent), Nassarawa (29 percent), Rivers (16 percent), Zamfara (16 percent) and Ogun (14 percent). Others are Anambra (14 percent), Kaduna (12 percent) and Borno (10 percent).

On the contrary, Abia, Kebbi, Osun and Katsina States reduced their loan portfolios by 5 percent, 2 percent, 1 percent and 1 percent, respectively. Accordingly, Abia State paid $1.73 million during the period while Kebbi, Osun and Katsina States paid about $900,000 each. Their external debts now stand at $34.2 million, $46.9 million, $61.8 million and $73.7 million, respectively.

A number of infrastructure projects have been cited as responsible for the state governments growing foreign loans. For instance, the Lagos State government cited projects such as the light rail, Lekki-Ikoyi suspension bridge, Lagos-Badagry Expressway, Apapa CBD road networks, Mushin-Isolo Road, Isolo-Isheri-Ijegun Link Bridge, Adiyan waterworks and Ayinke House Maternity Hospital, majority of which have been completed, while some others are nearing completion.

And in Kaduna, the completion of Gurara Dam and the Kaduna Industrial Estate necessitated the new borrowings.

Some experts have, however, called on the regulatory authorities to ensure probity at the state level to ascertain if the accumulated foreign debt is being judiciously put to use because of lack of internal monitoring mechanisms by most state houses of assembly.

In the past, a number of high-profile public sector officials have come under the hammer of the Economic and Financial Crimes Commission (EFCC) as well as that of the Independent Corrupt Practices and other related offences Commission (ICPC) for embezzling state funds.

On what the ICPC is doing to check wasteful spending by government officials, Winifred, a staff in the public enlightenment department of ICPC, says: “We do system review of public sector at least three times a year. Through that, we make sure that the amount allocated to a project is actually spent on that project, while the leftover must be returned to the coffers of government.”

Explaining why the state government increased its loans, Kemi Adeosun, commissioner for finance in Ogun State, says “the state is presently executing a World Bank programme called First National Urban Water Sector reform project” whose major aim is to reduce the prevalence of water-borne diseases in the state and the country as a whole.

Water Aid Nigeria reports that Nigeria loses 97,000 children every year to water-related diseases.

Other projects cited include the overhead bridges in Abeokuta and Ijebu-Ode, construction of several major roads, as well as over 20 model secondary schools across the state.

Among the geo-political zones, the South-West region is the most indebted, with a combined external debt of $1.29 billion, which is a 37 percent increase over the $941 million owed by the six states in the region by December 2012.

Next in line of indebtedness is the North-West with $502 million; South-South, $319 million; North-Central, $236 million, North-East, $230 million, and South-East $207 million.  However, each region’s ability to pay, measured by the internally-generated revenue (IGR), varies disproportionately.

The South-West region generated N265 billion as IGR in 2012, while the South-South and South-East realised N160 billion and N42.30 billion, respectively, as IGR during the same year. Also, the North-Central, North-West and North-East made N33.7 billion, N29.9 billion and N19.3 billion, respectively, as IGR in 2012 fiscal year.

States in Nigeria get most of their money from the Federal Government which earns 80 percent of its revenue from oil production. Theft and pipeline vandalism in the key crude-producing Niger Delta cut output to less than 2 million barrels a day in 2013, from the government’s estimate of 2.5 million barrels.