The economies of Nigeria’s states are sinking under the suffocating weight of domestic debt owed by the states and which has now ballooned to more than four trillion Naira.
This debt burden excludes the issuance of Naira denominated bonds which currently stand at over N390bn. Analysts at FBNQuest say the total domestic debt of state governments as at end of March 2020 stood at N4.11trn, equivalent to 2.9% of Nigeria’s Gross Domestic Product, GDP
The figure is unchanged from three months previously but it had increased by a frightening N840bn in 2015 alone, when the first of five debt relief packages were launched by the Federal government.
According to the analysts, the annual rise in the debt burden of the second tier of government has since slowed with the states now subject to greater regulatory oversight.
In addition, Nigeria’s banks have generally lost their appetite to lend to states due to the weakness of the oil price and its impact on the monthly distributions by the Federation Account Allocation Committee (FAAC), on which most states depend.
The five largest debtors at the end of 2019 included three oil producing states. The outstanding debt of these five states made up 32.7% of the total for all 36 states, leaving the sizeable balance divided between 31 other state governments and the Federal Capital Territory.
As with external borrowings, Lagos State which is the largest domestic debtor in terms of bank borrowings and bond issuance is judged by its accounts for 2019 to be well placed to meet its debt obligations.
Its total revenue of N645bn, of which internally generated revenue (N348bn) comfortably exceeded statutory allocations from the FAAC (N230bn).
Net earnings of N366bn were translated into an overall surplus of N67bn after capital items, depreciation and public debt service (N63bn).