The Fiscal Responsibility Commission has said that the debts of four states exceeded their net revenues by more than 400 per cent.
The states include Lagos, Osun, Cross River and Ogun.
FRC in its report ‘Debt sustainability analysis of state governments’ for 2019 also showed that the debts of all the 36 states and the Federal Capital Territory Administration exceeded 50 per cent of their revenues, contrary to limits set by the Debt Management Office.
The report contained in the 2019 Annual Report of the FRC stated that states that had ‘the proportion of Debt-to-Revenue above 50 per cent are assumed to have violated Section F(C) of Debt Management Guidelines, 2012’.
“The Debt Management Office Revised Guidelines on Public Debt Management, 2012 sets out the rules for public debt assessment in Nigeria.
“Section F(C) of the Guidelines states that the total amount of loans outstanding at any particular time including the proposed loan shall not exceed 50 per cent of the actual revenue of the body concerned, for the preceding 12 months.
“It can be deduced that all the 36 states and FCT exceeded the DMO threshold of 50 per cent.A
“Lagos State accounted for the highest Debt-to-Total Net Revenue as at the end of 2019, with 712.94 per cent. Osun State came second with 650.94 per cent Debt-to-Total Net Revenue. While Cross River and Ogun States were third and fourth with 597.36 per cent and 402.30 per cent respectively.
“Nonetheless, this does not lead to the conclusion that such states have over-borrowed, as the overall debt limits of the governments in the federation has not been set.
“It is on record that the overall limits of consolidated debts of federal, states and local governments are yet to be set since the enactment of the Fiscal Responsibility Act, 2007, though the commission has continually engaged the Honourable Minister(s) of Finance, Budget and National Planning on the issue.”
In the absence of predetermined limits set for the subnational government, the FRC uses the limit set by the DMO to determine the level of indebtedness of the states. This rule says that the debts of the states should never be higher than 50 per cent their revenues in the preceding 12 months.
Given the difficulty in determining the Internally Generated Revenues of the states and negligibility of the IGRs for most of the states (except Lagos), the FRC uses revenues collected by the states from the federation account for its calculations.
Debt and Revenue generation
Lagos with a public debt of N899,385,238,387.44 and a revenue of N117,883,619,963.71 had a debt to revenue ratio of 762.94 per cent.
It therefore exceeded the 50 per cent rule by 712.94 per cent.
For Osun, the public debt stood at N169,784,799,861.33 while the revenue stood at N24,222,272,968.41. This puts the debt to revenue ratio at 700.94 per cent. It therefore exceeded the 50 per cent rule by 650.94 per cent.
Cross River’s debt stood at N235,074,694,644.56 while its revenue stood at N36,312,879,237.96. Its debt to revenue ratio stood at 647.36 per cent and therefore exceeded the 50 per cent rule by 597.36 per cent.
Ogun, on the other hand, had a debt of N175,087,821,320.28 and a revenue of N38,710,634,518.42. Its debt to revenue ratio stood at 452.30 per cent. This means that it exceeded the 50 percent rule by 402.30 per cent.
However, states with the least excess debt ratio included Sokoto, Delta and Bayelsa.
Sokoto had a debt profile of N60,035,240,351.37, a revenue profile of N55,476,385,825.95 and a debt to revenue ratio of 108.22 per cent. Its excess was therefore put at 58.22 per cent.
Delta had a debt profile of N254,277,286,064.46, a revenue profile of N219,282,893,930.69 and debt to revenue ratio of 115.96 percent of 65.96 percent.
Bayelsa, on the other hand, had a debt profile of N167,343,157,583.65, a revenue profile of N140,129,363,936.73 and a debt to revenue ratio of 119.42 per cent. It therefore exceeded the 50 per cent rule by 69.42 per cent.