Lagos, Osun, Cross River and Ogun states of the federation are in debt while all 36 states of the nation are ‘so’ in debt. This scary data was recently circulated by the Fiscal Responsibility Commission, FRC stating that Lagos, Osun, Cross River, and Ogun states have exceeded their net revenue by more than 400 percent.
It is pertinent to mention by the report from the commission as studied by Taxmobile.Online that debts of all the 36 states and the Federal Capital Territory Administration exceeded 50 percent of their revenues, contrary to limits set by the Debt Management Office.
Taxmobile.Online learnt that determining the Internally Generated Revenues of states posed a real challenge especially when it had to do with negligibility of the IGRs for most of the states except the likes of Lagos. In calculating accurately these IGR, revenues collected by the states from the federation account were used as a yardstick for the calculations.
Breakdown of major states
Lagos by the record has a public debt of ₦899,385,238,387.44 and revenue of ₦117,883,619,963.71. The debt to revenue ratio is 762.94 percent. It, therefore, exceeded the 50 percent rule by 712.94 percent.
For Osun, the public debt stood at ₦169,784,799,861.33 while the revenue stood at ₦24,222,272,968.41. This puts the debt to revenue ratio at 700.94 percent. It, therefore, exceeded the 50 percent rule by 650.94 percent.
Cross River’s debt stood at ₦235,074,694,644.56 while its revenue stood at ₦36,312,879,237.96. Its debt to revenue ratio stood at 647.36 percent and therefore exceeded the 50 percent rule by 597.36 percent.
Ogun, on the other hand, had a debt of ₦175,087,821,320.28 and revenue of ₦38,710,634,518.42. Its debt to revenue ratio stood at 452.30 percent. This means that it exceeded the 50 percent rule by 402.30 percent.
States on the flip side of the record with the least debt ratio
Sokoto has a debt profile of ₦60,035,240,351.37, a revenue profile of ₦55,476,385,825.95 and a debt to revenue ratio of 108.22 per cent. Its excess is therefore put at 58.22 per cent.
Delta has a debt profile of ₦254,277,286,064.46, a revenue profile of ₦219,282,893,930.69 and debt to revenue ratio of 115.96 per cent of 65.96 percent.
Bayelsa, on the other hand, has a debt profile of ₦167,343,157,583.65, a revenue profile of ₦140,129,363,936.73 and a debt to revenue ratio of 119.42 percent. It therefore exceeds the 50 percent rule by 69.42 percent.
What you should know
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 percent their revenues in the preceding 12 months.
See full report below,
“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 percent 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 percent.
“Lagos State accounted for the highest Debt-to-Total Net Revenue as at the end of 2019, with 712.94 percent. Osun State came second with 650.94 percent Debt-to-Total Net Revenue. While Cross River and Ogun States were third and fourth with 597.36 percent and 402.30 percent 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 have 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.”