AN analysis by The ICIR has shown that five of Nigeria’s 36 states which received the highest allocations from the Federal Government in 2022 also logged the highest public debt in the same year.
This means these states got more money than their peers from the Federal Government and still borrowed from internal and external lenders.
The states are Lagos, Delta, Akwa Ibom, Edo, and Rivers.
For this analysis, The ICIR reviewed the total amount disbursed to all 36 states and the Federal Capital Territory by the Federal Government in 2022 through the Federal Account Allocation Committee (FAAC) and the total public debt of the states as of the fourth quarter of the same year.
Both documents, produced by the National Bureau of Statistics (NBS), were sorted to show the top 10 states with the highest FAAC allocations and public debt in the year under review.
The findings produced the above claims.
(Top 10 states with the highest FAAC and DEBT in 2022)
The ICIR reported how 31 states survived on federal allocation more than their internally generated revenue (IGR).
In 2022, the total revenue pulled by the 36 states and the FCT was N1.923 trillion, while the total FAAC allocated to the states was N3.24 trillion, bringing the total revenue to N5.17 trillion.
Meanwhile, the domestic debt accumulated in 2022 by the states totalled N5.34 trillion, while the external debt amounted to $4.46 billion. If converted using the exchange rate of N448.55/$1 as of December 2022, it amounts to N2 trillion. This brings the total public debt of the states to N7.34 trillion.
Breaking down the data
As of the fourth quarter of 2022, Lagos state’s public debt had risen to N1.37 trillion despite receiving N160.93 billion as FAAC and generating an IGR of N651.15 billion in the same year.
Also, Delta state had a total public debt of N331.101 billion despite generating N85.90 billion as revenue and receiving N348.65 billion as FAAC.
For Akwa Ibom, the total FAAC received by the state was N227.04 billion, while it generated a revenue of N34.81 billion. However, its total borrowing as of December 2022 stood at N239.38 billion.
Edo and Rivers states had a public debt of N227.73 billion and N264.59 billion respectively. However, both states received N87.50 billion and N270.54 billion as FAAC, respectively, while they generated N47.46 billion and N172.82 billion as revenues.
How these states performed
To examine how these five states performed in the 2022 fiscal year, The ICIR looked to the 2023 fiscal ranking of the 36 states and FCT released by a civic organisation, BudgIT, on health and education per capita in 2022.
The per capita budget is the average amount budgeted for each resident in the state for a fiscal year. With the allocation and borrowings by these states, it is expected that there would be a major investment in these two critical sectors when appropriating the yearly budget.
For instance, according to the report, Akwa Ibom spent 2.43 per cent and 7.29 per cent of its revenue on health and education. This placed the total health per capita to N1,494.7 and the total education per capita to N4,481.43.
In Delta, the health spending was 5.09 per cent bringing the total health spending per capita to N4,986.12 while the education spending was 11.85 per cent, bringing the total education spending per capita to N11,601.92.
|Total Health per capita
Total Education per capita
Also, Edo State had a total health spending of 5.57 per cent with a total health per capita of N2,189.65, while its education spending was 10.29 per cent with a total education per capita of N4,047.23.
Meanwhile, in Rivers, the revenue spending on health and education was 4.51 per cent and 14.39 per cent respectively. The total per capita on health was N2,267.01, while education was N7,232.84.
For Lagos State, the health spending was 7.42 per cent bringing the total health spending per capita to N6,201.73 while the education spending was 10.57 per cent, bringing the total education spending per capita to N8,831.69.
A senior research & policy analyst for BudgIT, Vahyala Kwaga, told The ICIR that the increasing debt of states would translate to them paying back more, especially when they do not generate enough IGR to offset the debt.
He added that Nigerian states do not often have the requisite productivity and general fiscal performance to justify their borrowing.
He said, “The challenge with states in Nigeria is that they fail to see the FAAC allocation as what it truly is: an intergovernmental transfer. This component of their revenue ought to be viewed as a ‘rainy day’ support rather than as a core part of state revenue.
“FAAC is often very sensitive to exchange rate fluctuations. This means states gain where the naira does poorly, but they would receive less where the naira does better. This state of affairs- where the states are heavily dependent on federal transfers that are themselves very volatile- is not good for any state’s fiscal health.