Nigeria Extractive Industry Transparency Initiative is worried over the rising debt profiles of both the federal and state governments in the country

|  By Anayo Ezugwu  |  Apr 10, 2017 @ 01:00 GMT  |

THE debt profile of federal and state governments are appreciating speedily. The Nigeria Extractive Industry Transparency Initiative, NEITI, on Tuesday, March 28, raised alarm over the rising debt profiles of states in the country, stating that the 36 states of the federation are indebted to the tune of N3.342 trillion as at the end of 2016.

NEITI, in the third edition of its quarterly review, titled: “FAAC Disbursements In 2016: Review and Projections” also put the total debt burden on four states – Lagos, Delta, Osun and Akwa Ibom – at N1.262 trillion as at the end of 2016.

The four states accounted for 37.76 percent of the total indebtedness of the 36 states of the federation. Again, the N3.342 trillion indebtedness of the 36 states represented 55.15 per cent of the 2016 budget of N6.06 trillion and 45.8 per cent of the 2017 budget estimates of N7.298 trillion.

According to NEITI, the indebtedness of the states became worrisome when viewed in relation to the declining revenue of the states, which had made it near impossible for the states to raise funds to finance their respective budgets.

NEITI warned that the already high debt burden of the states would rise even further in the days ahead, as many of them are expected to increase their rate of borrowing to finance their budgets. “The NEITI Review noted with concerns the debt profile of the states government were rapidly on the increase. The States fell short of raising enough revenues to fund their budgets.

“Thus, their debt burden, which is already high, will increase further in the nearest future as they increase borrowing to fund their budgets. Considering that most states already have a high debt burden, the possibility of even higher debts for the states remains quite high.”

Specifically, the report listed Lagos as the state with the highest debt burden of N603.25 billion as at the end of 2016, compared to the state’s revenue of N410.5 billion in the same period. Delta State followed with N331.95 billion debt as against N142.77 billion previously compared with revenue of N142.28 billion in the year under review, while Osun and Akwa Ibom states took the third and fourth place on the rising debt profile chart with N165.91 billion and N161.23 billion, respectively.

Others are Benue, with a debt burden of N49.15 billion; Edo N94.54 billion; Enugu N57.56 billion; while Ekiti, Kano, Katsina and Ogun are indebted to the tune of N67.29 billion, N81.05 billion, N30.03 billion and N103.75 billion, respectively.

On the other hand, the report noted that Yobe and Anambra States stood out clearly as states with the least debt burden, with debts of N11.74 billion and N20.60 billion, respectively as at the end of 2016.

The report added that, “On rising debt profile, the case of Osun, Cross River and Delta states raised major concerns given the fact that their total borrowings were found by the NEITI publication to be more than double the total revenues accruing to the states.”

It should be recalled that on February 27, Abraham Nwankwo, director-general, Debt Management Office, DMO, revealed that Nigeria’s total debt as at December 31, 2016, is $57.39 billion (N17.36 trillion). He made this known when defending the agency’s 2017 budget before the Senate Committee on Local and Foreign Debts in Abuja on Thursday.

He said the amount included domestic and foreign debts owed by the country as at the end of 2016. While giving a breakdown of the debt profile, he said the external debt profile stood at $11.41 billion (N3.48 trillion), while the domestic debt stock stood at $45.98 billion (N13.88 trillion). According to him, the debt stock of N17.36 trillion owed by the country included debts of the federal government, the 36 states of the federation and the Federal Capital Territory, FCT. Nwankwo also said that the difference was due to the projected debt service payments in respect of new financing that was not fully utilised, as only few loans became effective during the period.

He pointed out that the domestic debt stock of the federal government of Nigeria, the 36 states and the FCT accounted for about 80 per cent of the total debt, while their external debt stock accounted for about 20 per cent. He assured that though Nigeria’s debt profile was on the increase, it was not in a precarious economic situation that would warrant seeking for debt relief.

Nwankwo added that in spite of the recession, the economic indices had not portrayed Nigeria as a weak economy to warrant seeking for debt relief. “Nigeria is not in a position to beg for debt forgiveness. “In spite of the present state of the economy, the country is still counted as a strong economy among other countries. The economic indicators show that Nigeria has a strong economy.”

He said if borrowing would be genuinely committed to infrastructural development, it would go a long way in the move to develop the economy. On repayment of the debt, he said the ministry of finance was making effort to expand the nation’s tax base.

According to him, this will be done by ensuring that people and companies that are not paying taxes begin to pay to boost the revenue base and reduce the need for borrowing. He lamented that tax collection in Nigeria had been poor, contributing to reduced revenue generation.

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