A civil society organisation, Brain Builders Youth Development Initiative (BBYDI) has advised Lagos and other states in the South-West region, to reduce their appetite for borrowing, especially foreign loans, saying such practice is dangerous and economically unhealthy.
Abideen Olasupo, the global director of the BBYDI, raised the concern on Wednesday at a news conference/Southwest desk review validation meeting and public dialogue on tax and debt justice convened by his organisation in collaboration with CISLAC Tax Justice and Governance Platform and Christian Aid Nigeria.
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He said the meeting which was attended by officials from tax authorities, debt management offices, financial experts, community leaders, religious leaders, youth groups, civil society organisations and media professionals, sought to address issues relating to the management of taxes and the critical imperative of debt justice within the Southwest region.
A report on ‘Debt Sustainability Assessment of the Southwest States in Nigeria’ prepared by the BBYDI was also presented at the programme.
Olasupo, speaking on the debt sustainability assessment report, which analysed the financial status and budget implementation reports of each of the six states in the Southwest between 2020 and 2022, stated that governments in the region, especially that of Lagos, must check their borrowings, stressing that rising debt levels often translate to higher debt service payments, leaving a limited budget for essential public services.
He noted that data from the Debt Management Office (DMO) revealed that the overall debt profile of Lagos increased by 41.88% from N965.4 billion in 2018 to N1.4 trillion in 2022.
He added that the foreign component of Lagos debts, which as of December 31, 2022, was $1.25 billion, was not only the largest in Nigeria but continues to grow as seen with the 29.26% year-on-year growth in 2022.
Olasupo, who said Lagos was spending a larger part of its revenue in paying back debts, urged the state government to stop accumulating foreign loans, noting that the depreciating value of the naira increases the economic risks of obtaining loans in foreign currencies.
Quoting from the report, Olasupo said: “A look at the debt sustainability assessment of Lagos State reveals that its debt service to Gross FAAC ratio surpassed its sustainability threshold of 70 percent in 2021, 2022, and 2023, placing it at high risk on this index.
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“This means that for the three years under review, its federal transfers/receipts from the federation account were inadequate to finance its debt service obligations. The state continues to spend a considerable part of its revenue in paying back its debt.”
