How state governors in next dispensation can solve debt, unemployment problems

NEWLY elected and re-elected state governors will be confronted with problems of massive debts and high unemployment levels, when the next dispensation takes off on May 29.

Economic analysts are, however optimistic that all hope is not lost if the governors would seek proper debt restructuring, embrace fiscal discipline and ride on their areas of competitive advantage to create wealth for their people.

Nigeria’s 2022 Multidimensional Index (MPI) report revealed that 133 million people were multidimensionally poor. Sixty-five per cent of the poor – 86 million – were living in the North, while 35 per cent – nearly 47 million – were living in the South. This situation, analysts said, raises concerns about the economic status of Nigeria’s sub-nationals.

The report also showed that multidimensional poverty is higher in rural areas, where 72 per cent of people were poor, compared to the 42 per cent in urban areas.

Also, the MPI showed a spread of poverty figures across the states and the Federal Capital Territory (FCT).

States and unemployment

According to the 2022 MPI figures, Imo state has an unemployment figure of 56.6 per cent, Adamawa 54.9 per cent, Cross River 53.7 per cent, Yobe 52.6 per cent, Akwa Ibom 51.0 per cent, Abia 50.1 per cent, Edo 49.0 per cent, Kaduna 44.3 per cent, Anambra 44.2 per cent, and Borno 44.2 per cent.

Rivers state posted an unemployment figure of 41.6 per cent, FCT 40.4 per cent, Ebonyi 40.2 per cent, Kogi 39.0 per cent, Niger 38.8 per cent, Jigawa 38.7 per cent, Lagos 37.1 per cent, Bayelsa 36.7 per cent, Bauchi 34.2 per cent, Ekiti 32.2 per cent, Enugu 31.6 per cent, Taraba 31.5 per cent, Gombe 31.3 per cent, Delta 31.3 per cent, Nasarawa 29.8 per, cent, Plateau 26.6 per cent, and Kano 25.4 per cent.

Unemployment figures in the year for Katsina state was 25.3 per cent, Oyo 18.0 per cent, Kebbi 17.3 per cent, Ondo 17.1 per cent, Kwara 16.6 per cent, Ogun 16.4 per cent, Sokoto 14.5 per cent, Zamfara 13.0 per cent, Benue 12.0 per cent and Osun 11.7 per cent.

Rising debts

Nigeria’s public debt, according to the National Bureau of Statistics (NBS), rose to N44.06 trillion in the third quarter of 2022.

Lagos state recorded the highest domestic debt in the third quarter of 2022 with N877.03 billion, the report said.

The report also revealed that Nigeria’s public debt stock, which included external and domestic debts, rose from N42.84 trillion (or $103.31 billion), in the second quarter of 2022 to N44.06 trillion (or $101.91 billion) in the third quarter of the same year.

The figures showed that the public debt in national currency grew by 2.84 per cent within the period.

The data showed the debt figure comprised the debt stock of the federal government, the 36 state governments, and the FCT.

The report said external debt stood at N17.14 trillion (or $39.66 billion), while domestic debt was N26.91 trillion in the quarter under review.

The statistics office said the share of external debt to total public debt stood at 38.91 per cent in the third quarter of 2022, while domestic debt was recorded at 61.08 per cent.

On state profile analysis, the report showed Lagos state recorded the highest domestic debt in the third quarter of 2022 with N877.03 billion, followed by Delta with N272.61 billion, and Ogun with N241.78 billion.

The lowest debt was recorded in Jigawa state with N44.40 billion, followed by Kebbi and Katsina with N60.13 billion and N62.37 billion respectively.

Suggestions on how states can address the debt crisis

For the Lead Director, Centre for Social Justice (CSJ), Eze Onyekpere, states can wriggle themselves out of the debt trap through fiscal discipline and a budget transparent system that allows all stakeholders access to how their financial administrations are run.

Onyekpere said, “Most of the states are indebted to the way and manner that is not fiscally responsible. Many of them, without bail-out, may find it difficult to pay back those loans. It is, however, not the end of the World. It depends on how the manager takes some steps.

“Borrowing is not wrong per se, but it depends on what you do with borrowed proceeds. What many of the elected and re-elected state executive need to do is reschedule the year of amortisation and tenure of such debts. This will help them not to use a greater percentage of their resources on debt servicing.”

He noted that states can borrow, but they have to do so in a stategic manner.

He said,  “A state like Abia with a competitive edge in business can borrow to deepen its industrial competitiveness and attract businesses in neighbouring West African countries.

“I will advise every state governor -elected and re-elected – to, in their initial broadcast, tell the stakeholders in their states the debt they inherited, arrears of salaries inherited, contractor arrears, and other major outstandings. If state governors are open and transparent, voluntary compliance with tax payments, as well as citizen participation and trust in governance will grow.”

Onyekpere: ‘There is hope for states with fiscal discipline, transparency and strategic planning’

Abia state governor-elect, Alex Chioma Otti, admitted he has an enormous task ahead of him, but enthused the situation was not totally irredeemable.

In his acceptance speech after he was declared winner of the  election, Otti said, “Our victory is for the Abians, for the civil servants, for the pensioners many of whom are being owed close to 60 months arrears of salary, and for doctors who have been on strike and are currently being owed 26 months arrears of salaries.

Otti: admits enormity of task ahead of him

“I know it’s going to be difficult, but I’m prepared to give good governance to our people. I already have my vision, encapsulated in my manifesto. In the next few days, I’ll appoint a transition committee and subsequently appoint a team, preparatory to my swearing in.”

He mentioned as most important now a deep look at the economy and how to harvest its low hanging fruits. This, he said, would enable him to jumpstart the state’s depressed economy.

Otti, noting that the state’s debt profile is currently about N190 billion, added, “When we go back to May 2015 when the government took over, records showed the debt was N34.5 billion. But currently, it has skyrocketed. However, all hope is not lost for Abia state. Our plan is to double the status of the N3.5 trillion Abia state economy.”

The governor-elect disclosed he was already engaging banks on possibilities of debt restructuring, debt write–off, interest write-off, and debt forgiveness.

He stressed that the next step would be to get approval from the Debt Management Office (DMO and issue bonds that would provide good terms for the loans for a much longer period. This, he said, would kick-start the state’s economy.

“For an economy that is in comatose, we have to jumpstart it by payment of salaries, allowances, pensions, and others.When this is done, people can participate actively in the economy. We are going to clear those outstanding salaries before the end of the year,” he said.

Onyekpere explained that states’ peculiarities vary and could inform economic options elected officials could use for wealth creation and lessening the unemployment burden.

“States like Katsina, Kaduna, Kano, Kebbi, and others have peculiar economic needs. They should look at areas of their competitive edge and grow their economies along those lines,” he said.

Incumbent Delta state governor, Ifeanyi Okowa, said that debt restructuring by the Federal government at the inception of the current administration helped states to stay afloat.

Okowa said, “When we came in in 2015, many states were having challenges with their debts. We worked with the Federal government to restructure those debts for 30 years.

“If you go to Delta state’s debts, you’ll discover that the debt restructuring we did with the Federal government has enabled us to be solvent, and has kept us to where we are currently.

“We will exit most of the internal debts we have in our state by May 29, 2023.

    Possible opportunities on financial autonomy

    A development economist, Kelvin Emmanuel, told The ICIR that states can build their financial autonomy with relevant enabling  laws.

    “Bill number 45 in the Constitutional Amendment that was recently signed into law in lieu of Executive Order EO10 that sought to grant financial autonomy to both state legislature and judiciary is the first step to governance and controls at sub-national levels,” Emmanuel said.

    Emmanuel believes financial autonomy can help states to be prudent

    He said that the Order, along with the rule enforced by the Nigeria Financial Intelligence Unit (NFIU), which prohibits cash withdrawals from state treasury, is critical for managing appropriation by sub-national authority.

    “Considering that quite a number of states have a rising debt profile with irrevocable standing payment order (ISPO) is a reason the suit currently sitting at the Supreme Court, which seeks adjudication following a decision of a high court to let states collect their Personal Income Tax (PIT) and Value Added Tax (VAT), is key for states to raise their internally generated revenue, and pivotal to raising state government bonds as a tool to fund budget deficits in successive appropriations,” he said.

    Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.

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