The debt profile of the nation’s 36 states paints a grim picture of the poor management of their finances by their chief executives. The unsustainable borrowing pattern of most of the states and their failure to invest in productive sectors that could stimulate their economies and repay the debts are disturbing. The latest Quarterly Review of the Nigeria Extractive Industries Transparency Initiative (NEITI) reveals that the total debt stock of the states stood at N3.342 trillion as at December 2016.
The NEITI Report was based on the Federal Accounts Allocation Committee (FAAC) disbursements, review and projection. Highlights of the report show that Lagos, Delta, Osun and Akwa Ibom states have accumulated debts amounting to N1.26trn. This is 37.76 percent of the total indebtedness of the 36 states. In real terms, the N3.342trn total indebtedness of the states is 55.15 percent of the 2016 Federal budget of N6.06trn, and 45.8 percent of the 2017 budget estimate of N7.298trn.
NEITI described the debt stock of the states as worrisome, predicting that it could spiral further in view of their declining revenues on account of the shortfall in revenue accruing to the Federal Government and the failure of most of them to increase their Internally Generated Revenue (IGR).
From the statistics, Lagos State tops the list with a debt of N603.25 billion. This is against its total Federal allocation of N410.5bn in 2016. Delta State is second with a debt stock of N331.95bn with revenue earnings of N142.77bn. Osun and Akwa Ibom states owe N165.9bn and N161.23bn, respectively. Other states with huge debt profiles are Ogun, N103.75bn; Katsina, N81.05bn; Kano, N67.29bn; Edo, N94.54bn and Cross River, N166bn.
The NEITI report particularly expressed deep concern about the debt profiles of Delta, Osun and Cross River States, noting that their revenue cannot sustain their borrowing pattern. On the external front, the Debt Management Office (DMO) has equally voiced its concern about the states’ indebtedness. The Director General of the agency, Dr. Abraham Nwankwo, revealed that their debts currently stand at $57.89bn.
The figures, as at April 2016, showed that Lagos also tops the list in external borrowing with $1.08bn (about N377bn), Kaduna, $234m; Cross River, $131m; Edo, $123m; Ogun, $109m; Bauchi, $87bn and Katsina, $78m. However, in the midst of this gloomy picture of most states, Yobe and Anambra states were found to be the least indebted, with Yobe on top with N11.74bn and Anambra, N20.60bn.
The spiraling debt profile of the states is disheartening. It shows why most state governments cannot meet the expectations of their people. There is nothing wrong with borrowing. What is wrong is the failure to channel loans to things which can have positive effect on economic growth. The situation has been made worse by dwindling revenue as a result of the slump in oil prices in the international market.
Although states like Lagos, Rivers and Delta may have the financial muscles to ride the storm of huge debts, financial discipline and prudent management of their revenue are necessary. The situation of states like Delta, Akwa Ibom, Kaduna, and Katsina, which have huge Federal allocations, but with bigger debts, compared to Yobe and Anambra states with lower debt profile, speaks volumes of the need for better management of resources by the states.
Overall, though the country is still said to have under-borrowed with debts at about 13 percent of Gross Domestic Product (GDP), prudence must remain the watchword. We agree with the International Monetary Fund (IMF) which recently cautioned Nigeria on its rising debt levels because, if it remains unchecked, it could become detrimental to our macroeconomic stability and that of the sub-region. That advice should be heeded, while the loans taken should be used judiciously.