22 states spent N251bn on debt servicing in nine months
Twenty-two states have spent a total sum of N251.79bn to service debt borrowed by past administrations within nine months of assuming office, findings by Sunday PUNCH have shown.
Our correspondent also gathered that the states obtained fresh loans of N310.99bn between July 2023 and March 2024, despite increased monetary allocations from the Federation account.
The information was obtained from the budget implementation reports of each state sourced from the Open Nigerian States, a budgIT-backed website that serves as a repository of government budget data. BudgIT is a Nigerian civic organisation promoting transparency.
The performance report is prepared quarterly and issued within four weeks from the end of each quarter. It includes the original approved budget and revised/final budget appropriation for the year 2023 against each organisational unit for each of the core economic classifications of expenditures (personnel, overheads, capital, and others). It also includes the actual expenditures for the quarter Q3, attributed to each organisational unit, as well as the cumulative expenditures for the year to date, and balances against each of the revenue and expenditure appropriations.
An analysis by Saturday PUNCH showed that the states include Abia, Akwa Ibom, Anambra, Benue, Cross River, Delta, Ebonyi, Ekiti, Jigawa, Kaduna, Kano, Katsina, Kebbi, Kogi, Niger, Ondo, Osun, Plateau, Rivers, Sokoto, Taraba and Zamfara.
Further analysis of the report indicated that the states faced an uphill task of stimulating the economies of their respective states after they inherited at least N2.1tn in domestic debts and $1.9bn in external debts from their predecessors.
Investigations also showed that the states were confronted with many months of unpaid workers’ salaries and mounting pension liabilities amidst agitation for the implementation of the nationally agreed minimum wage, rising inflation, escalating prices of goods and services, and dwindling purchasing power.
In Abia State, Dr Alex Otti, who emerged as the only governor on the platform of the Labour Party inherited a total domestic debt of N104,573,334,025.73, and an external debt of $95,632,239.04.
While Benue State Governor, Hyacinth Alia, got N143,368,150,982.89 in domestic debt, and $30,472,977.14 obligations to foreign creditors.
The Governor of Cross River State, Bassey Otu, carried the burden of N175,198,799,155.96 and $215,754,975.33 in domestic and foreign debts.
Also, Akwa Ibom State Governor, Umo Eno, met a domestic debt of N219,617,660,991.63 and $46,569,647.22 in external debt among others.
Recall that following the removal of fuel subsidy and the unification of the foreign exchange markets, there was a notable increase in states’ earnings from the Federation Account Allocation Committee, reaching a total of N3.34tn in the post-fuel subsidy era.
With the improved earnings, states had the freedom to settle outstanding loans acquired by the previous administration, particularly during the third and fourth quarters of 2023. This financial enhancement provided the states with the opportunity to address fiscal obligations, and alleviate financial burdens inherited from previous administrations.
Experts have, however, attributed the significant increase in debt servicing cost partly to the devaluation of the naira, which drove up the cost of servicing foreign debt obligations as the CBN grappled with the forex liquidity crisis and exchange rate volatility.
A breakdown of the implementation report showed that the states spent N75.47bn to service domestic and external loans in the third quarter of 2023. This increased by 5.12 per cent or 3.87bn to N79.34bn in the fourth quarter, and N96.99bn in the first quarter of 2024 (January – March).
According to the report, Abia state disbursed N2.62bn to service inherited debts, while Akwa-Ibom spent N21.96bn in nine months on debt servicing. Anambra spent N5.12bn, Cross River spent N13.82bn, and Delta State spent N30.31bn to service loans obtained by former Governor Ifeanyi Okowa.
Ebonyi State under the leadership of Francis Nwifuru has spent N7.50bn on servicing loans obtained by past administrations, while the Ekiti State Governor, Biodun Oyebanji, approved a sum of N9.88bn for repaying debts.
Other states including Jigawa spent N4.34bn, Kebbi (N1.98bn), Kogi (7.29bn), Niger (N3.66bn), Ondo (N11.35bn), Osun (N14.76bn), Plateau (N51.39bn), Rivers (N4.12bn), Sokoto (N4.04bn), Taraba (N9.49bn), Zamfara (N3.1bn) and Kaduna (N16.04bn).
Despite this heavy debt servicing burden, the report indicated that the state governments had continued to obtain more loans to take care of different expenditures.
Further analysis showed that the states obtained credit facilities totalling N310.99bn within the review period, despite heavy financial allocations from the federal government.
The report revealed that states, in 2023, got the highest Federal Account Allocation Committee allocations in at least seven years with N627.73bn obtained in September, followed by N610.5bn in December, N555.75bn in August, N533bn in November, N514bn in July, and N497.97bn in October.
Our correspondent’s findings also revealed that the majority of these loans were sourced from international creditors, contrary to the Federal Government’s emphasis on borrowing from the domestic market.
Sunday PUNCH had earlier reported that 13 new state governors collectively borrowed N226.8bn from domestic and external financiers in the first six months after taking office.
Further analysis showed that Katsina State was among the states that got the highest loan of N20.14bn between January and March. It was followed by Ondo State with N18.33bn loans. Third on the list is Niger State with loans worth N16.19bn.
Kogi State also obtained loans worth N11.33bn from creditors within the quarter.
Other states including Zamfara got N6.23bn, Ekiti (N5.65bn), Abia (N3.37bn), Kaduna (N2.27bn), Ebonyi (N173.36m), Osun (N174.24m), Plateau (N322.12m) and Taraba (N6.23bn).
In April, The PUNCH reported that most of the FAAC funds for Osun, Ondo, Kaduna, and Cross River states will be used in servicing debts this year.
This is because these states currently have a deficit of N10.94bn, N27.72bn, N15.83bn, and N10.02bn respectively, following debt servicing deductions by FAAC.
The states, as indicated in their 2024 budget may have to rely on Internally Generated Revenue or borrow from domestic/external sources to finance payment or possibly seek alternative solutions to settle their civic obligations to their workers throughout this year.
A further breakdown of the data revealed that Lagos, Akwa-Ibom, Delta, Ogun, Zamfara, Plateau, and Sokoto will be the highest debt-paying sub-nationals.
Commenting on the issue, economist, Paul Alaje, said debt servicing and loans were burdens that could limit economic development at the sub-national level.
Paul, speaking in an earlier interview, stated that the huge debts left by past administrations was inimical to growth, and added that loans collected by state governments and the projects the governors spent the money on should be properly investigated.
He said, “Debts are like a burden, especially when the money collected is not spent on capital expenditure or projects that can create revenue for the government in the future. In Osun State, for instance, Gboyega Oyetola’s administration took over a huge debt profile from his predecessor, Rauf Aregbesola, and when Aregbesola left, Oyetola started struggling not to borrow more money. Few new governors can borrow more, because lenders will also consider their ability to pay.”
Efforts made to get the reaction of the Director General of the Nigeria Governors’ Forum, Abdulateef Shittu, were unsuccessful. He declined to comment when our correspondent reached him on the issue, stating that the situation could only be well analysed by the Debt Management Office.
Debt repayment part of governance – Sokoto govt
Efforts to get the reaction of the Sokoto State Commissioner for Information and Orientation, Sambo Danchadi, were not successful, as his number was not available at the time of filing this report.
However, a top government official in the state who spoke on condition of anonymity said debt servicing was part of the government’s work, adding that it was difficult to ascertain if all the debts were from the immediate past administration.
He said, “Some of these debts we are talking about were owed during the days of the old Sokoto State, comprising of Sokoto, Kebbi, and Zamfara.
“The unfortunate thing is that the immediate past government did not hand over any document whatsoever to the incumbent administration to ascertain many things,” he added.
Debt servicing not affecting Ondo
However, the Ondo State Governor, Lucky Aiyedatiwa, admitted that the state government had been servicing debt incurred by the past administrations in the state without problem.
The governor, who spoke through his Chief Press Secretary, Ebenezer Adeniyan, said his administration had not borrowed any money since it came on board.
However, the governor noted that the debt had not made any negative impact on the state’s economy, saying the government was running smoothly.
He said, “Servicing debt is a responsibility of the government, and this administration is not defaulting on repaying those debts.
“However, the Aiyedatiwa administration has not incurred any debt since it assumed office. Also, debt servicing did not have much impact on the state’s economy. The repayment was captured in the budget. So, it was prepared for.”
