TEN governors, who were re-elected into office for a second term, increased the debt profiles of their states by a total of 54.9 per cent during the first four years of their administrations.
This means that, cumulatively, the 10 states had a combined debt figure of N1.8 trillion in 2019, but the figure increased to N2.8 trillion at the end of 2022, according to figures obtained from the Debt Management Office (DMO) and the National Bureau of Statistics (NBS).
By this data, it means the states borrowed more debts than they serviced during their first term.
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The 10 governors are Seyi Makinde (Oyo), Mai Mala Buni (Yobe), Inuwa Yahaya (Gombe), Babajide Sanwo-Olu (Lagos), AbdulRahman AbdulRazaq (Kwara), Abdullahi Sule (Nasarawa), Ahmadu Fintiri (Adamawa), Babagana Zulum (Borno), Bala Mohammed (Bauchi) and Dapo Abiodun (Ogun).
The governors were re-elected for a second term in office on March 5, 2023, alongside 18 newly elected governors, after serving their first term from 2019-2022.
The total domestic debt figure of the 10 states as of December 2019 was N1.2 trillion, but this increased to N2 trillion in December 2022.
Also, in 2019, the external debt stood at N620.5 billion at an exchange rate of N360.42 to $1. But, at an exchange rate of N423 for $1, the debt increased to N803.7 billion. However, without the exchange rate conversion, the external borrowings dropped from $2 billion in 2019 to $1.8 billion in 2022, a 6.2 per cent drop within four years.
While the states amassed a debt figure of N1.8 trillion in 2019, they only generated a revenue figure of N582.7 billion in the same year. Also, the latest NBS data on states’ internally generated revenue showed that the 10 states generated a sum of N1.02 trillion in 2021.
The ICIR reported how the newly elected and re-elected state governors would be confronted with problems of massive debts and high unemployment levels as they take office. A report also captured how the newly elected governors would inherit domestic and external debt figures of N2.1 trillion and $1.9 billion respectively upon their assumption of office.
Introspection on the data
Within the first four years, Yobe, Ogun, Lagos and Oyo states had the highest domestic borrowings with a percentage increase of 213.3 per cent, 90.1 per cent, 81.8 per cent and 76.0 per cent respectively.
Yobe state’s domestic debt figure increased from N29 billion to N91 billion, Ogun state’s from 142.3 billion to N270.5 billion, Lagos state’s from N444.2 billion to N807.2 billion, and Oyo state’s from N91.6 billion to N161.2 billion.
Meanwhile, Borno and Adamawa states had the lowest domestic debt figures with a percentage increase of 15 per cent and 21.1 per cent respectively.
On external debts, without the conversion, Ogun state recorded the highest increase of 35.4 per cent from $100.6 million to $136.3 million. It was followed by Bauchi and Borno states with 23.8 per cent and 5.8 per cent increase respectively.
On the other hand, Oyo, Yobe and Gombe states’ external debts dropped by 27.9 per cent, 16.1 per cent and 10.7 per cent respectively.
The ICIR analysis revealed that Ogun state had the highest debt profile both on external and domestic debts in four years.
Debt will reduce fiscal space – expert
The Senior Research & Policy Analyst for BudgIT, Vahyala Kwaga, told The ICIR that the increasing debt figures means that the states would spend more of their revenues on debt servicing, a situation Kwaga said would in turn reduce fiscal space for expenditure activities.
“If the borrowing increases without adequate safeguards, especially in the form of parliamentary scrutiny, this will mean the fiscal space of states will continue to shrink. More of the revenues of the state will be used in offsetting debts (and interest), which means less will be available for actual government activities,” he said.
Kwaga noted that the states needed to ensure that their debts stay within reasonable levels, and also ensure that the money is spent efficiently and effectively.
He also advised that state ministries should at the budget formulation stage, be guided by the highest standards of existing medium-term plans, fiscal transparency and budget realism.
Kehinde Ogunyale tells stories by using data to hold power into account. You can send him a mail at jameskennyogunyale@gmail or Twitter: Prof_KennyJames | LinkedIn: Kehinde Ogunyale