President-elect Muhammadu Buhari and the governors that will assume office for the first time on May 29 will have huge debt burdens to bear, records of the Debt Management Office (DMO) has revealed.
According to the DMO, the Federal Government has an external debt stock of $6.445 billion and another N7.9 trillion domestic debt totalling N9.19 trillion, as of December 31, 2014. The debts are currently being serviced with N700 billion every year.
Nigeria’s most indebted states
DMO’s external debt figures (without adding domestic debts) show Lagos as Nigeria’s most indebted state with $1.17 billion debt. It is distantly followed by Kaduna with $234 million debt, Cross River ($142 million), Edo ($123 million), Ogun ($109 million), Bauchi ($88 million), Katsina ($79 milllion), Osun ($74 million), Oyo ($72 million) and Enugu ($69 million).
Least indebted states
The states that are least indebted are:
Taraba (N4.56 bn), Borno (N4.61 bn), Delta (N4.85 bn), Plateau (N6.19 bn), Yobe (N6.25 bn), Benue (N6.62 bn), Abia (N6.76 bn), Zamfara (N7.11 bn) and Kogi (N7.16 bn).
While most of the highly indebted state have accumulated debts through issuance of bonds, Abia State has been very cautious about doing this, hence its position as one of the least indebted states.
World Bank Consultant and Abia State Finance Commissioner, Dr Phillip Nto, explaining the state’s reason for applying caution when it comes to accumulating debt, to Vanguard, said Abia State is mindful of the future of Abians.
“Ordinarily when you collect bond, you are mortgaging your future because you pay over a long period of time but our governor is one that feels that it is not proper to mortgage the future of the state. Abia State is trying to come out from the mess, the monumental difficulty which it was pushed into in early 2000, so for the state to be mortgaged again means that the state will be declared insolvent.
“It is the reason the governor (Theodore Orji) is not enthusiastic about going to the bond market. But what some other states are achieving with their bond money, Governor T.A. Orji is also achieving with the amount he gets from the federation account and the IGR,” said Nto.
Osun State is one of Nigeria’s poorest states, but it ranked 9thh in the list of the most indebted states in the country. One of its debt-accumulating activities was the N11.4 billion sukuk which made headlines in 2013. Some indigenes of the state have, however, argued that the Islamic bond like several other debts, have not translated to development in the state, with several projects abandoned and workers’ salaries left unpaid for months.
The federal government has also expressed concern over the rate at which states are borrowing. Last year, the FG directed Deposit Money Banks not to grant fresh loans to state governments unless they got approval and clearance from the Federal Ministry of Finance.
The Minister of State for Finance, Bashir Yuguda, said the decision is not aimed at stalling the development efforts of the state governments, as alleged, but to protect the states from excessive accumulation of debts.
“The domestic debt profile of some states is scary. The states are so much in debt that only a small amount of their allocations get to them at the end of the day because most times money for debt servicing is removed from source,” he said while addressing participants in Course 23 for security agents at the National War College, Abuja.
Yuguda said most of the states have been experiencing difficulties in servicing their existing debts and it would not be advisable to allow them take fresh loans. Rather, he stressed the need for the states to continue to look inwards for other sources of revenue to pursue their development programme.