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“How come the smallest state has second highest debt?”: 5 questions as debts by states hit N1.8 trillion

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“How come the smallest state has second highest debt?”: 5 questions as debts by states hit N1.8 trillion

by Stanley Azuakola

The Nigerian Guardian newspaper has obtained a yet-to-be-released report from the Debt Management Office (DMO) titled – “Five years of Effective Sub-National Debt Management in Nigeria,” from which they published excerpts.

The Scoop does not have the full report yet but certain questions are already cropping up from the little we have seen.

According to the report, the debt portfolio held by the country’s 36 states and FCT rose from N1.42 trillion in December 2011, to N1.86 trillion by June 2012. It’s not like anyone is confused, but we just to need to re-emphasise that ‘trillion’ has twelve zeroes. Amazing, right?

According to the DMO: “The total public debt of the 36 states rose from N1.42 trillion as at December 31, 2011 to N1.86 trillion by June 2012. The marginal increase of about 3.32 per cent was as a result of slight increases in both the external and domestic debt stocks. As in 2011, domestic debt dominated the total public debt portfolio of the 36 states of the federation in June amounting for over 77 per cent of the total as it did in the previous year.”

Of the N1.86 trillion debt, “local or domestic debt obligations account for N1.186 trillion with the balance being the foreign debt liabilities. Contractors’ liabilities top the chart on the debt table followed closely by commercial banks’ loans, bonds, pension and gratuity and government-to-government debt in that order.

Now the questions:

1. How come there are no figures from the ACN led state of Oyo, the PDP led state of Jigawa and the FCT?

Data for those three did not form part of the DMO report. The Guardian speculated that the three administrations repotedly did not co-operate much with the DMO during the exercise, which is very worrying, if true. We are hoping that by the time the official report is being released sometime in March, the DMO tells us why those records ain’t there and call out these administrations if need be.

Sunlight is the best disinfectant, and the finances of the various states of the federation need to be exposed to sunlight. No exceptions.

2. How come the smallest state in the country has the second highest debt?

According to census figures, Bayelsa state has the smallest population in the country. It does not fare any better in terms of land mass.

That’s why it is both ironic and worrying that Bayelsa state, despite its oil wealth which is used to cater for fewer number of people in comparison to other states, still managed to owe N167.173 billion, comprising domestic debt stock of N162.822 billion and foreign debt of N4.350 billion.

It is somewhat understandable that Lagos State is the highest borrower with a liability of N238.262 billion, comprising a local debt of N157,536 billion and a foreign component of N80.726 billion. But Bayelsa? Wow. Serious questions need to be asked of the last two administrations in that state.

3. In  fact, why the Niger Delta?

Bayelsa had to be mentioned specifically because it is a small state. But that’s even a small part of the picture.

Look at this: Why is it that apart from Lagos state, the entire top 5 borrowers are Niger Delta states, the very same states which receive more money from the federal purse than every other.

– Lagos, Southwest (total debt: N238.262 billion)

– Bayelsa, Southsouth (total debt: N167.173 billion)

– Cross River, Southsouth (total debt: N113.598 billion)

– Rivers, Southsouth (total debt: N112.229 billion)

– Delta, Southsouth (total debt: N93.304 billion)

There must be a reason for this, and we know that it is not because the Niger Delta states have been more spectacular in delivering democracy’s dividends. So why exactly is this the case?

4. Rivers state again?

Now this wasn’t a part of the report. But we are sure that if the DMO report had extended beyond June 2012, Rivers state would have gone much higher in the debt stakes.

Last year the Rotimi Amaechi led administration borrowed hugely, ostensibly to complete ongoing projects. Not much honestly was seen from that as even members of the assembly said this week when the governor came to request for permission to borrow yet another N120 billion to (guess what?) complete ongoing projects.

Quite a few lawmakers expressed reservations, but knowing the rubber stamp that is the Rivers legislature, Amaechi would have his way again.

5. A thought for Borno and Yobe

These were the two least indebted states. This is not a question, but we know why they do not owe much.

It is not because the administrations there are frugal and live within their means but the insecurity makes it tough for anyone to willingly lend to them. Borno owes just N3 billion while Yobe owes N6.939 billion.

Now that we’ve asked our five questions, here are other highlights from the report:

However, on a debt solvency and liquidity ratio analysis relative to revenue inflow to states, Cross River State is the heaviest debtor as it scores the highest burden rating of 138.86 per cent as at December 2011, representing her total public debt to total revenue ratio. The state’s public revenue is put at N77.489 billion while its public debt is far above the figure at N107.600 billion. Also, on a scale of domestic debt stock analysis relative to Internally-Generated Revenue (IGR), Cross River polls 584 per cent, next to the highest ranked Bayelsa State, which pulled 1,712 per cent.  Cross River’s domestic debt stock relative to IGR at the period was only N16.553 billion.

On the total public debt sustainability score, Bayelsa is next to Cross River with a burden score of 104.93 per cent and a debt stock of N167.123 billion relative to its revenue base of N159.278 billion while it has the highest domestic debt burden score of 1,712 per cent relative to its IGR. The state’s local debt stock at the time of the analysis was N162.822 billion while its IGR was a paltry N9.510 billion.

Lagos State is placed as the third risky state in the total public debt solvency analysis as it polled 73.21 per cent after Cross River and Bayelsa. Lagos public debt at the time was N234.608 billion while its revenue base was put at N320.474 billion. It equally scored a ranking of 61 per cent on the domestic debt solvency analysis, as its domestic debt stock was N157.536 billion, relative to its IGR base of N257.419 billion.

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