The recent report of the Lagos State government’s fiscal status has startled not a few Lagosians and concerned Nigerians. The state has in excess of about N420billion debt profile. It is interesting that the state government has downplayed this issue. It would be recalled that the Fiscal Responsibility Commission, FRC, had disclosed that unless some drastic measures were taken to forestall continued reckless spending by most of the states in the federation, efforts by the Federal Government to instill financial discipline in administering Nigeria would yield no positive impact. The Commission revealed that as at the end of 2011, more than nine states of the federation over-borrowed their limits, suggesting that their financial health is in dire straits. The states listed are Lagos, Ekiti, Kaduna, Cross Rivers, Ondo, Edo, Bayelsa, Ebonyi and Kwara.
According to the report, for Lagos State, the debt to revenue ratio stood at 155.4 per cent, with the annual statutory revenue standing at N125.48bn and a debt profile of N193.44bn. On a revenue profile of N44.97bn and a debt profile of N35.98bn, Ekiti State’s ratio stood at 80 per cent. Kaduna had a revenue profile of N63.94bn, debt profile of N40.08bn and debt to revenue ratio of 62.68 per cent. For Cross River State, the ratio stood at 61.44 per cent on revenue of N56.92bn and a debt of N34.97bn. The ratios for Edo, Ondo, Bayelsa, Ebonyi and Kwara States stood at 56.03 per cent, 55.12 per cent, 54.5 per cent, 51.85 per cent, and 51.75 per cent, respectively.
Four other states whose debt to revenue ratio exceeded the states’ average of 36.36 per cent are Imo, 49.4 per cent; Ogun, 45.45 per cent; Bauchi, 41.97 per cent; and Osun, 36.52 per cent while the least indebted states by the debt to revenue ratio include Rivers, 2.02 per cent; Borno, 3.28 per cent; Akwa Ibom, 3.88 per cent; Taraba, 6.79 per cent; Plateau, 8.02 per cent; and Adamawa, 8.72 per cent.
More worrisome is the report of external debt status of some of the states. Lagos, Kaduna, Cross River, Ogun and Oyo top the list of external debts incurred by state governments as of June 30, 2012.
According to the list, Lagos topped the list of external debtors with $517,677,672 as of June 30, 2012. Next to Lagos is Kaduna with $197,155.525 foreign debt. Cross River comes next with $109,351,503 external debt. Following Cross River is Ogun State as the fourth most indebted state with $96,285.547 as of June 30, 2012. Oyo is the fifth most indebted state as far as external debt is concerned with $78,878,401 being owed as of June 30, 2012. The Fiscal Responsibility Commission revealed that it drew its data from the DMO, banks, Securities and Exchange Commission and the Office of the Accountant-General of the Federation. According to the commission standard borrowing limit set for states is put at 50 per cent to ratio of revenue. Although after the reports of some states’ indebtedness were made public, there were refutations of the allegations by some of them.
Considering the dire socio-economic consequences of this development, we align with the calls for deep and introspective reflection by all concerned Nigerians, particularly the affected states. To posit that this situation is worrisome is to put it mildly looking at the level of infrastructural decay, unemployment and tardy pace of socio-economic development in some of these heavily indebted states.
The affected state governments cannot be vilified for borrowing, especially if such borrowed funds were for the development of the states and their people. What we disapprove is the seeming general situation in most of the states where recurrent expenditures are indiscriminately over-bloated for political reasons as against economic expediency, tidy fiscal management and budget discipline.
Our other fear is not far-fetched. When states go into high indebtedness without sincere appraisal of their Internally Generated Revenue (IGR) and federal quota vis-avis a programme for timely repayment of loans, their future and that of their people is mortgaged. This trend of borrowing and indebtedness has been the bane of genuine development in Nigeria since the end of the civil war in 1970. This should be stopped.
We urge governments at all levels and other stakeholders to use necessary legal framework to tame this flagrant abuse of credit window from further abuse.
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