States and Burden of Huge Debts, Uncompleted Projects (II)
As state chief executives begin to face the reality of governance after the euphoria of the successful conduct of the recent elections, concerns are being raised over the exposure of some of the states to huge debt burden. THISDAY presents the continuatio
With the completion of the general elections, all attention is now being focused on what to expect from the incoming and existing administration in the various states of the federation. Economic affairs commentators said the victory dance will soon give way to agitation by the people in terms of performance from the various executives. The challenge, they stressed, will manifest in the dwindling revenue from the Federal Allocation occasioned by the dip in oil revenue. But the reality is that most of the outgoing governors have incurred debts which they claimed were necessitated by the low level of federal allocation and the yearnings for developmental projects.
The pathetic situation of the finances of some of these states was underscored by the outgoing Minister of State for Finance, Bashir Yuguda, who disclosed that most of the states have been experiencing difficulties in servicing their existing debts and it would not be advisable to allow them take fresh loans.
The minister, who defended the position of the finance ministry in advising money deposit banks to be wary of entering into debt agreement with the states, said the country’s overall debt profile, particularly those of the state governments, was scary. Though he did not provide specific details, the minister emphasised the need for the states to continue to look inwards for other sources of revenue to pursue their development programmes. Nigeria’s total public debt stock, according to the Debt Management Office, as at December 2014, stood at about $67.73 billion and N11.2trillion, which is about N1.2trillion higher than the 2013 figure of N10.04trillion.
A breakdown of the figures showed that external debt, including those of the states, was $9.71 billion and N1.63 trillion. The Federal Government’s domestic debt was $47.05 billion and N7.9trillion, while those of the states stood at $10.97 billion and N1.708 trillion. Based on the huge debt profiles of the state governments, the Federal Government had last year directed deposit money banks not to grant fresh loans to states until they got the relevant approval and clearance from the Federal Ministry of Finance. The directive had stirred misgivings from most state governments, which accused the Federal Government of attempts to frustrate them from securing funds from banks to settle contractors and finance on-going development projects. But, according to the minister, “The domestic debt profile of some states is scary. The states are so much in debt that only a small amount of their allocations get to them at the end of the day, because most times, money for debt servicing is removed from source.”
The minister said this was the reason the Federal Government had to discourage states from further borrowing. The Debt Management Office’s external debt figures (without adding domestic debts) show Lagos as Nigeria’s most indebted state with $1.17 billion debt. It is distantly followed by Kaduna with $234 million debt, Cross River ($142 million), Edo ($123 million), Ogun ($109 million), Bauchi ($88 million), Katsina ($79 million), Osun ($74 million), Oyo ($72 million) and Enugu ($69 million). Lagos: High But Serviceable Debts Gboyega Akinsami No doubt, Lagos State under Governor Babatunde Fashola has a high debt burden. The state Commissioner for Finance, Mr. Ayodeji Gbeleyi, recently put the state’s total debt stock at N435 billion. The credit facilities, according to the commissioner, were obtained from different internal and external sources between 2009 and 2014. At the 2014 budget analysis, when Gbeleyi gave the breakdown of the state’s debt profile, he disclosed that though the state had N435 billion in debts, it equally had a net of N98 billion in sinking fund and that the debt was sustainable because the state’s total public debt stock to GDP stood at 2.98 per cent in 2013. But the acceptable international benchmark adopted by the Debt Management Office (DMO) is 40 per cent.” The state, according to him, also floated a total of four tranches of bond. He put the state’s bond portfolio at N275 billion. He said the first one “is N50 billion for five year tenure issued in 2009 and will mature in 2014. The second tranche is N57.5 billion issued in 2010. It is a seven-year bond and will mature in 2017. The third tranche is valued N80 billion issued in 2012 and will mature in 2019. The last tranche of bond is N87.5 billion issued in 2013 will mature in 2020.” However, the commissioner did not provide details about the state’s external credit facilities. But at different public functions, Fashola provided justification for the debt stock it had incurred. He explained that the state government did not borrow to fund recurrent expenditure. Rather, the governor said his administration borrowed to fund strategic infrastructure that could make Lagos investment and tourist destination in Africa. Some of the projects the state government used the loan for include Lekki-Ikoyi link bridge constructed with about N30 billion; Mile 12-Ikorodu road N29 billion; Lagos light rail (blue line) $1.3 billion and WEMPCO road about N6 billion. The state, also, borrowed money to construct Lagos-Badagry road project and its construction is divided into three phases. Phase I cost about N87 billion, while Phase II is over N100 billion. The projects are respectively at over 85 per cent and about 45 per cent stage of completion. Unlike several other states, though Lagos debts may be high, the debts are serviceable because of the its high IGR. There are also major projects to show for those loans. Ondo: Keeping Sealed Lips on Debt Profile James Sowole
In Ondo State, no government official was ready to speak on the state’s debt profile when our correspondent sought clarifications on the subject matter. Though efforts to get official figure of the debt burden on the Ondo State Government were unsuccessful, it was gathered that the state is owing about $52.688million. The amount is equivalent to N10.538 billion and which the state is servicing.
The servicing of the loan, it was gathered, was partly responsible for the reduction in the amount of money left for the state for execution of projects and payment of salaries. At every forum, the government had been saying the money