Ceo forum 2023

Incoming governors face N4.27trn domestic debt burden

Twenty-eight incoming governors, some of whom are incumbents who have won second term, will face a total domestic debt burden of N4.27 trillion.

Experts have identified the debt stock as a major challenge facing the incoming governors, saying urgent reforms and initiatives targeted at revenue generation would be critical.

Data from the Debt Management Office (DMO) show that the total domestic debt stock of the 28 states where elections were held last Saturday stood at N4.27 trillion as at September 2022. These states had an accumulated foreign debt stock of $3.729 billion as at June 30, 2022.

Governorship elections held in 28 states, including Abia, Adamawa, Akwa Ibom, Bauchi, Borno, Benue, Cross River and Delta states.

Others are Enugu, Ebonyi, Gombe, Jigawa, Kaduna, Katsina , Kano, Kebbi, Kwara, Lagos, Nasarawa, Niger, Ogun, Oyo, Plateau, Rivers, Sokoto, Taraba, Yobe, Zamfara.

The debt burden topped the list of experts’ concerns amid depleting monthly revenues from the Federation Account Allocation Commission coupled with poor revenue generation by the states.

Experts who spoke with BusinessDay decried the high level of debts incurred by incumbent governors, most of whom have not made considerable efforts in finding ways of raising revenues, but rather depend majorly on the monthly allocations from Abuja.

They said it is imperative for incoming governors, upon resumption, to seek ways of improving revenues, cut operating costs and ensure sustainable debt levels.

Gabriel Okeowo, country director at BudgIT, a civic tech organisation which provides financial reports on budgets, told BusinessDay that the level of states’ debt is quite high and has remained a cause for concern.

Okeowo said the incoming governors would have to develop strategies to boost internally generated revenues (IGRs) or they would not be able to meet their obligations.

According to data obtained from the DMO, total domestic debt stock for all the 36 states and the Federal Capital Territory (FCT) was N5.36 trillion as at September 2022. Their external debt stock was valued at $4.562 billion as at June 30, 2022.

Of the total figure, Adamawa government’s debt was put at N122 billion; Oyo, N160 billion; Imo, N210 billion; Bayelsa, N151 billion; Ogun, N241 billion; Akwa Ibom, N219 billion; Anambra, N75 billion, Bauchi, N144 billion; and Rivers, N225 billion.

Kano’s domestic debt stood at N125 billion; Ebonyi, N67 billion; Edo, N110 billion; Ekiti, N118 billion; Taraba, N90.8 billion; Cross River, N175.1 billion; Zamfara, N109.6 billion; Borno, N96.3 billion; Katsina, N62.3 billion; Enugu, N89.8 billion; Benue, N143.3 billion; Kogi, N90.1 billion; Nasarawa, N72.6 billion; Kebbi, N60.1 billion; Kwara, N109.5 billion; Jigawa, N44.4 billion; Abia, N104.5 billion; Yobe, N92.8 billion; Sokoto, N85.5 billion; and Delta, N272.6 billion.

Lagos owed N877 billion as of September 2022; Gombe, N139 billion; Kaduna, N86 billion; Niger, N98 billion; Ondo, N78 billion; Osun, N149 billion; Plateau, N151 billion; and FCT, N112 billion.

The 36 states and the FCT generated a total revenue of N1.90 trillion in 2021, according to data from the National Bureau of Statistics.

“Revenue generation has remained a big challenge for government at state levels, and that is because many of the governors depend on revenues from the federal account to cover their expenses,” Okeowo said.

“The President-elect can assist by removing fuel subsidy; this will improve the amount disbursed from the federal account,” he said.

He, however, expressed concerns that subsidy removal may result in harsh economic consequences for the populace.

“The incoming governors must have a team that will help overcome revenue challenges, ” he said.

Muda Yusuf, director of Centre for the Promotion of Private Enterprise, is of the view that most states have low capacity to service their debts, a situation he said was creating problems of liquidity and affecting cash flows.

He said: “When state governors spend so much servicing debt, it affects their ability to provide needed infrastructure in their states. They must ensure that the debts are sustainable.

“Another issue is that the governments are expected to use debts to fund infrastructure that will yield income for the states and not for day-to-day running of government. Incoming governors must look into generating more revenues and ensure that debts are sustainable.”

According to the BudgIT 2022 State of States report, at least 50 percent of the total revenue of 33 states were federal transfers, with 13 states relying on federal transfers for at least 70 percent of their total revenues.

For example, Akwa Ibom had total revenue of N190.82 billion, of which N159.43 billion was federal allocation and N31.39 billion was internally generated.

The total revenue for Benue stood at N74.59 billion, with N61.99 billion being federal allocation.

The internally generated revenue for Yobe stood at N8.46 billion, while the federal allocation was N57.93 billion. Taraba generated N9.76 billion internally and received N57.43 billion from the federation account.

The report showed that Yobe (N8.46 billion), Taraba (N9.769 billion), Kebbi (N9.857 billion, Gombe (N10.56 billion) and Benue (N12.60 billion) had the least IGRs in 2021.

States with the highest IGRs include Lagos (N546.34 billion), Rivers (N141.399 billion), Ogun (N78.169 billion), and Kaduna (N52.412 billion).

For Auwal Rafsanjani, executive director of Civil Society Legislative Advocacy Centre, it is imperative for the incoming governors to understand the challenges in their various states, and get qualified, competent people that can provide quality service and boost the government’s revenue.

“The incoming state governors are going to face huge financial challenges as a result of the debt, they may even be expected to pay some contractors for projects done during the previous administrations,” he said.

Rafsanjani said most states have been in deplorable conditions for years.

“Unfortunately, they may not be able to address many issues in their states, due to the weak governance structure and corruption that is in our system,” he said. “But without fail, they will have to set up formidable teams that can help develop programmes looking at economy, infrastructure and the entire aspects of government.”

“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,” said Paul Alaje, senior economist at SPM Professionals.

According to him, 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,” he added.