By Jeph Ajobaju, Chief Copy Editor
Lagos amassed N507.38 billion to top the charts of 15 states whose total domestic debt rose 153.82 per cent to N1.68 trillion between December 31, 2015, and March 31, 2021.
Latest data from the Debt Management Office (DMO) shows that each of the 15 states recorded at least 100 per cent increase in debt in the six years.
Yobe had the highest rise of 1,994.08 per cent but landed at N60.10 billion.
Per reporting by PUNCH, the other 13 states are Abia, Adamawa, Anambra, Benue, Borno, Imo, Katsina, Niger, Ogun, Ondo, Sokoto, Taraba, and Zamfara.
Between December 31, 2015, and March 31, 2021, the debt of
· Lagos rose from N218.54 billion to N507.38 billion (132 per cent)
· Abia – N33.53 billion to N70.57 billion (110.47 per cent)
· Adamawa – N47.20 billion to N95.22 billion (102 per cent)
· Anambra – N3.58 billion to N59.71 billion (1,567.88 per cent)
· Benue – N39.94 billion to N128.25 billion (221.1 per cent)
· Borno – N22.34 billion to N91.86 billion (311 per cent)
· Imo – N71.74 billion to N149.89 billion (108.94 per cent)
· Katsina – N11.50 billion to N58.34 billion (407.3 per cent)
· Niger – N21.50 billion to N62.33 billion (189.91 per cent)
· Ogun – N75.92 billion to N156.34 billion (105.93 per cent)
· Ondo – N26.65 billion to N72.6 billion (172.42 per cent)
· Sokoto – N11.66 billion to N38.55 billion (230.62 per cent)
· Taraba – N27.65 billion to N100 billion (261.66 per cent)
· Yobe – N2.87 billion to N60.10 billion (1,994.08 per cent)
· Zamfara – N46.28 billion to N96.98 billion (109.55 per cent)
In total, the debt of the 15 states rose from N661.89 billion on December 31, 2020 to N1.68 trillion by March 31, 2021, a rise of 153.82 per cent.
All 36 states of the federation and the Federal Capital Territory Administration (FTCA) recorded an increase of 64.8 per cent in domestic debts.
Total domestic debt of the 36 states and the FCT was N2.50 trillion as of December 31, 2015, but jumped to N4.12 trillion on March 31, 2021.
Lagos defends debt-to-GDP ratio
Lagos Information and Strategy Commissioner, Gbenga Omotosho, told PUNCH that the state is within a reasonable debt-to-GDP (Gross Domestic Product) ratio.
“It is when you check your debt-to-GDP ratio that you know whether your debt is too heavy or not. The World Bank and the international best practices show that your debt ratio to your GDP must not be more than 40 per cent,” he said.
“Lagos is not close to it at all. Lagos is within 13 and 14 per cent. So, Lagos has so much room to borrow more because it has the capacity to pay and that in itself is not a problem.
“What is the problem is what we do with it. Lagos is not borrowing to pay salaries; Lagos is borrowing for projects, projects that would generate employment, projects that will reduce the suffering of people, projects that will improve the social economic position of the state.”
Experts criticise borrowing for consumption
But Sheriffdeen Tella, a professor of economics at Olabisi Onabanjo University Ago-Iwoye, Ogun State faulted the states for borrowing for consumption.
“Even at the federal level, we have not been able to see the positive effects of borrowing because they are borrowing for consumption, and not for development.
“They will say they are borrowing for development, but you find that is not the case. The states don’t have long term plans just like the federal government, they just feel there is need to borrow and so they borrow,” Tella told PUNCH.
“Instead of investing the money in projects that will bring returns, they are not doing so. They are also borrowing to acquire money for political purposes rather than economic purposes.
“Each state has areas they can develop to increase their internally generated revenue, but instead, they rely largely on the allocations from the federal government. This is not good enough.”
Akpan Ekpo, a professor of economics and public policy at the University of Uyo and Chairman of the Foundation for Economic Research and Training, warned that if a state cannot get internally generated revenue (IGR) to pay back debt, it could lead to a higher debt burden.
Said he: “First, we need to assess if these states have the capacity to pay back the debts. For example, Lagos State, which is heavily indebted, may have the capacity to pay back its debts because it generates a lot of IGR.
“However, many Nigerian states do not generate enough IGR to even pay salaries. When they incur debt, it is more burden on these states.”
Former Imo State Finance Commissioner, Professor Uche Uwaleke, said: “I think the situation can be blamed on the drop in FAAC allocation as most states in the federation depend on FAAC distribution.
“The drop in FAAC was due largely to collapse in oil revenue in 2015/16 and drastic fall in government revenue again in 2020 due to COVID-19. The Nigerian economy was in recession during these periods.
“On the spending side is the fact that many of the heavily indebted states have huge recurrent expenditure involving personnel costs and overheads.
“The periods of economic recession made it difficult for many states to downsize civil servants in order not to create social crisis.
“So, against the backdrop of unexpected shortfall in FAAC and IGR, many states resorted to borrowing especially from banks despite the bailout programmes executed by the Federal Government.”
To stop or reduce borrowing, Uwaleke advised states to raise IGR, lessen dependence on federal allocation, eradicate ghost workers, reduce the number of political aides, cut overhead costs, deploy technology, and minimise corruption.