Nine states of the federation are in serious debts judging by their revenue profile, the Fiscal Responsibility Commission has said.

The states are: Lagos, Ekiti, Kaduna, Cross Rivers, Ondo, Edo, Bayelsa, Ebonyi and Kwara.

In its Annual Report and Audited Accounts 2011, which was released in Abuja on Thursday, the FRC listed the nine states as being under the weight of huge debts.

The FRC also raised the alarm that given the rate of growth of the national debt and debt servicing, the nation’s debt was unsustainable except action was taken to reduce the rate of growth or increase the Gross Domestic Product growth rate.

According to the report, the total indebtedness of each of the states as of December 31, 2011 was beyond the limit set by the Debt Management Office.

The DMO had said that states’ indebtedness should never rise more than 50 per cent of their annual revenues in the previous 12 months, while the nation’s total indebtedness should not be more than 40 per cent of the GDP.

For each of the nine states, however, the total indebtedness as of December 31, 2011 was more than 50 per cent of their revenue profile.

For Lagos State, the debt to revenue ratio stood at 155.4 per cent, with the annual statutory revenue standing at N125.48bn and a debt profile of N193.44bn.

On a revenue profile of N44.97bn and a debt profile of N35.98bn, Ekiti State’s ratio stood at 80 per cent. Kaduna had a revenue profile of N63.94bn, debt profile of N40.08bn and debt to revenue ratio of 62.68 per cent.

For Cross River State, the ratio stood at 61.44 per cent on a revenue of N56.92bn and a debt of N34.97bn.

The ratios for Edo, Ondo, Bayelsa, Ebonyi and Kwara states stood at 56.03 per cent, 55.12 per cent, 54.5 per cent, 51.85 per cent, and 51.75 per cent, respectively.

Four other states whose debt to revenue ratio exceeded the states’ average of 36.36 per cent are Imo, 49.4 per cent; Ogun, 45.45 per cent; Bauchi, 41.97 per cent; and Osun, 36.52 per cent.

The least indebted states by the debt to revenue ratio include Rivers, 2.02 per cent; Borno, 3.28 per cent; Akwa Ibom, 3.88 per cent; Taraba, 6.79 per cent; Plateau, 8.02 per cent; and Adamawa, 8.72 per cent.

The FRC said the debt profile included external debts; money borrowed from banks and the capital market, but excluded debts owed to contractors, which could not be ascertained.

The FRC explained, “Only statutory revenue is used in the analysis because the states refused to supply data on their IGR. In any case, the IGR is not more than eight per cent of the states’ total except Lagos, which also refused to furnish its IGR. In essence, the omission of the IGR may not distort the result of the analysis.

“It is also pertinent to observe that the non-inclusion of the outstanding debt owed to contractors and contingent liabilities may more than offset the omission of the IGR.

“The Federal Government owes 111.63 per cent of its statutory revenue. In terms of debt to GDP ratio, the Federal Government debt stock is about 14.5 per cent. The national debt of N8.29tn is, however, about 22.1 per cent of the GDP. This is higher than the publicised figure of 17.5 per cent.

“At present, Nigeria’s GDP is growing at 7.45 per cent. The stock of debt is growing at approximately 23.75 per cent, while debt service is growing at 26.81 per cent.

“In a situation in which the growth rates of debt and debt service outstrip the growth rates of revenue and GDP, it is safe to say that debt is hardly sustainable, unless the rates of growth and GDP are stepped up and the rate of borrowing is reduced or held constant.”

For the Federal Government and its agencies, the statutory revenue stood at N5.54tn; while the debt stock stood at N6.19tn, thereby taking the debt to revenue ratio to 111.63 per cent. The entire country had a debt to revenue ratio of 85.38 per cent as of December 2011.

However, the Commissioner for Finance, Lagos State, Mr. Ayo Gbeleyi, said he was not aware of the FRC report, but noted that the state’s revenue and expenditure profiles were available for free on the government’s official website.

Lagos is not broke – Fashola
Monday, 13 August 2012 07:49 PATRICK ATUANYA

Lagos State Governor Babatunde Raji Fashola has debunked insinuations that the state is bankrupt or experiencing cash flow problem. In an exclusive interview with BusinessDay in his office, Fashola added that Lagos was meeting its obligations to all its creditors.

“We are paying our debt, we remain creditworthy, we still borrowed money from the banks recently because we have in this year’s budget borrowing provision to finance the deficit. We’re solvent, clearly. Who would even lend money to an insolvent institution?”

Fashola added that the state government bond which was floated in the former Governor (Tinubu’s) time has been repaid by the current administration before its maturity.

The Fashola administration has, however, floated two bonds (the N50 billion, 5-year, 13 percent series 1 and the N57 billion, 7-year, 10 percent series II) with a provision, that a sinking fund be set up where 15 percent of the state’s internally generated revenue (IGR) is paid into the fund, to secure the debt.

“So, categorically, we are solvent and we are paying our debt,” he said.

According to him, Lagos currently has two levels of debt, the local debt and the foreign debt.

With regards the local debt, Fashola said the state is discharging its obligations to its contractors.

There are also loans owed to banks by the state, which Fashola said amounts to about 11 or 12 loans.

“I think about 8 of them will be fully amortised by the end of this year, so that will leave about 4. Of course, we will take a few more before I leave but we won’t leave the next government with a burden beyond what is reasonable,” he said.

For the foreign debt, Fashola said that there are about 16 different components and about 9 or 10 of them are debts taken by the Federal Government on behalf of all the states, for projects like FADAMA, water resources, HIV, prevention.

These are debts contracted by the nation and disaggregated as a responsibility to all states and constitute close to 60 percent to 70 percent of the state’s foreign debt, he said.

Other components of the foreign debt were used to fund the Bus Rapid Transit BRT/Lamata, LMDGP/slum clearance, LAWMA/waste management, and Eko education fund.

Fashola noted that the concessionary nature of the foreign debt makes them an attractive option for the state to utilise in its quest for infrastructure development.

“We’ve built roads in Agege, schools in Badiya, schools in Bariga, in Shomolu and in Gbagada with part of the concessionary foreign loans. We’ve used the same loan to finance the BRT corridor. We’re using it now to extend from Mile 12 to Ikorodu. Ikorodu road was built 40 years ago, it’s still there.

So if we do this you can be sure this asset will stay for another 30 to 40 years. Now the money is deducted at source, from our monthly FAAC meeting. So we don’t even miss it, we don’t know we’re paying.”.

seanet02: Arrant nonsense!
How can you decide the debt to revenue ratio without including the IGR?
Du.mb people are always in charge in this country.

seanet02: Arrant nonsense!
How can you decide the debt to revenue ratio without including the IGR?
Du.mb people are always in charge in this country.

According to the report, the total indebtedness of each of the states as of December 31, 2011 was beyond the limit set by the Debt Management Office.

seanet02: Arrant nonsense!
How can you decide the debt to revenue ratio without including the IGR?
Du.mb people are always in charge in this country.

mekaboy:

Even if the IGR was factored it won't make much difference because the money owed contractors was not included, if it was it cld cancel our part of the IGR.

legalcode: So all these noice about Fashola and Lagos State are borrowed funds. Chai!! Lagos don suffer, Tifnubu is really hitting them hard.

one.east3:
Tinibu is sucking yeroba land dry..

taharqa: Where d HYPOCRITES at

seanet02: . Illiteracy, stone age ignorance and astounding folly are your prime problems.
If you have gotten the least of cognitive and comprehensive abilities, you will not have throw this garbage out of your stinking mouth.

moodswing: As an economist, I have consistently argued that Lagos is borrowing more than it should and also not investing on strategic developmental projects with real economic value on the short/long term.

Just like When Ngige was governor, he spent almost all the money the state had and borrowed just to finance wonder projects with no commensurate economic value. Just because we ignorantly see building of certain infrastructures especially roads as development, politicians use it to a grave advantage.

Gov't should be strategic in drawing up it's scale of preference before arbitrarily spending on fancy projects just because it's an eye candy that appeals to the ignorant sense of the ordinary people.

Billions were expended to plant flowers on bad roads, then Roads and bridges concessioned, because the state can't fund the project.

Rochas is another dude preying on people's ignorance. In a bid to fulfill too many bogus campaign promises, he has extensively borrowed to finance dubious and highly inflated projects.

Even Elechi of Ebonyi state is another sorry story not even worth going into.

Brazil isn't as fancy as the UK, but the economy of Brazil did surpass that of the UK. Making more appealing to investment than the UK which in return boosts it's economic potential and growth.


God help us and give us the leaders we need not the politicians we want.

chairman: Nigeria, why not use the idi amin solution, print more money and drill more oil and settle the dept

moodswing: As an economist, I have consistently argued that Lagos is borrowing more than it should and also not investing on strategic developmental projects with real economic value on the short/long term.

Just like When Ngige was governor, he spent almost all the money the state had and borrowed just to finance wonder projects with no commensurate economic value. Just because we ignorantly see building of certain infrastructures especially roads as development, politicians use it to a grave advantage.

Gov't should be strategic in drawing up it's scale of preference before arbitrarily spending on fancy projects just because it's an eye candy that appeals to the ignorant sense of the ordinary people.

Billions were expended to plant flowers on bad roads, then Roads and bridges concessioned, because the state can't fund the project.

Rochas is another dude preying on people's ignorance. In a bid to fulfill too many bogus campaign promises, he has extensively borrowed to finance dubious and highly inflated projects.

Even Elechi of Ebonyi state is another sorry story not even worth going into.

Brazil isn't as fancy as the UK, but the economy of Brazil did surpass that of the UK. Making more appealing to investment than the UK which in return boosts it's economic potential and growth.


God help us and give us the leaders we need not the politicians we want.

chairman: Nigeria, why not use the idi amin solution, print more money and drill more oil and settle the dept