The rise, in the third quarter of 2022, of the country’s public debt to N1.2 trillion, which also rocketed the nation’s total public indebtedness to N44.06 trillion is driven by new borrowings by the Federal Government to part-finance the deficit in the 2022 Appropriation Act, alongside new borrowings by sub-nationals.
And as Nigeria groans under the burden of debt servicing, which gulps the lion’s share of the nation’s revenue, the domestic debt outlook in many of the 36 states of the federation, and the Federal Capital Territory (FCT), as confirmed by the Debt Management Office (DMO) is increasingly worrisome.
The DMO’s latest revelation that the total public debt stock rose from N42.84 trillion recorded in Q2 to N44.06 trillion in Q3, 2022, indicated a 2.85 per cent increase quarter-on-quarter, while the country acquired a N1.22 trillion debt within three months.
In a breakdown, the DMO said the total public debt stock consists of domestic debt of N26.92 trillion and external debt of N17.15 trillion.
“Total public debt stock, which comprises the total domestic and external debt stock of the Federal Government of Nigeria, all states’ governments and the Federal Capital Territory stood at N44.06 trillion,” the statement by the DMO explained, adding, “In comparison, the total public debt figure as of June 30, 2022, was N42.84 trillion. The total domestic stock as of September 30, 2022, was N26.92tn while the total external debt stock as of September 30, 2022, was N17.15 trillion.
“The increase in the debt stock was largely due to new borrowings by the Federal Government to part-finance the deficit in the 2022 Appropriation Act, as well as, new borrowings by sub-nationals,” the office confirmed.
Without a commensurate change in their circumstance, rural dwellers are scandalised at the soaring domestic debt, which they say technically sentences unborn generations into slavery.
The pathetic picture painted by the collective domestic debt profile indicates that from N3.03 trillion in 2015, it ballooned to N5.28 trillion in the second quarter of 2022.
It is, however, unfortunate that this increased borrowing by the states has not translated into better living standards for their citizens.
The latest National Multidimensional Poverty Index Report, released by the National Bureau of Statistics (NBS) said that more than 133 million Nigerians, representing 63 per cent of the population are poor due to a lack of access to health, education, good living standards, and rising rate of youth unemployment.
Experts say the high poverty index is a result of the failure of many state and local governments, which are closer to the people to provide good governance and the needed social amenities that make life worth living.
The resort to borrowing by the state governments stems from their inability to generate enough revenue internally, a situation that was made worse by shocks from the COVID-19 pandemic, insecurity, and, of course, climate change.
Most of the states still depend on federal allocations to fund their budgets, as their internally generated revenue remains perennially weak. Unfortunately with the dwindling revenue of the Federal Government, the situation is getting worse gradually.
According to the World Bank, the states would lose about N18.8 billion in oil and gas revenues in 2022, as worsening revenue remittances from the Federation Account Allocation Committee (FAAC) increases their budgetary pressures.
The bank also warned that many states would be unable to meet up with their expenditures, given an increase in their debt servicing obligations.
Sharing the World Bank’s position is the Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Muda Yusuf, who expressed fears that the states are headed for a debt crisis.
According to him, “The government’s actual revenue can hardly cover the recurrent budget, which implies that the entire capital budget and part of the recurrent expenditure are being funded from borrowing. This is surely not sustainable.”
A breakdown of states’ debts shows that the Lagos State government is leading the pack with N797. 304 billion of the N5. 281 trillion. In other words, the state owes 15 per cent of what is owed by the sub-nationals, as of June 30, 2022. Lagos has the highest internally generated revenue (IGR) (about N40 billion) every month.
Data from DMO indicated that Delta, Ogun, and Rivers states follow Lagos with N378. 878 billion, N241. 782 billion, and N225. 505 billion respectively.
Other highly indebted states include Imo, N210. 394 billion; Akwa Ibom, N203. 951 billion; Cross River, N 176. 086 billion; Oyo, N159. 906 billion; Ogun, N150. 529 billion; Bayelsa N 150. 430 billion; Plateau N144. 608 billion; Benue N143 . 547 billion Bauchi, N129. 207 billion; Kano N125. 186 billion, and Gombe N123. 608 billion.
The others are Ondo, N62. 270 billion; Kastina N66. 675 billion; Anambra N72. 429 billion; Nassarawa, N72. 965 billion; Kaduna N78. 194 billion; Sokoto N89. 920 billion; Taraba N 90. 807 billion; and Yobe with N 96. 624 billion.
Additionally, Abia owes N107. 612 billion; Borno, N102. 496 billion; Edo, N112. 118 billion; Ekiti, N119. 543 billion; Enugu, N89. 887 billion; Kano, N125. 186 billion; Kogi N90. 538 billion; Kwara N 110. 512; and Niger State with N80. 919 billion, while the Federal Capital Territory owes N75. 783 billion.
Conversely, Jigawa has the least debt of N45. 135 billion, followed by Ebonyi and Kebbi states with N59. 171 billion, and N60. 417 billion respectively.
The Special Assistant to the President of African Development Bank (AfDB) on Industrialisation, Prof. Oyebanji Oyelaran-Oyeyinka, in an interview with The Guardian said: “When a debt incurred has disappeared into private pockets, it’s a bad debt. When debt and interest being paid is towards a mismanaged project that is not yielding a return, that is bad debt; when a debt cripples the ability of the state to deliver services or make a productive investment, that is also a bad debt…”
The SA said when debt becomes excessive, it not only reduces public investment capacity, it also limits private investment, as well as creates conditions for a fiscal crisis. Many of these states currently have limited fiscal space, resulting in their inability to deliver necessary infrastructure that will attract investments,” he said.
Oyelaran-Oyeyinka continued: “There is a point of view that the overall national debt to GDP ratio is manageable, but this is a country with massive inequalities. What percentage of our citizens enjoy national wealth? The GDP? The negative impact of crippling debt burden is disproportionally shared. When debt forecloses opportunities, the poor get poorer.”
He said to deal with the problem of mounting debt, states need greater autonomy to create their wealth, stressing: “every state is endowed with natural resources. These resources are the inputs into the industrial system. States should go all out to attract private investments to create jobs, and absorb the army of unemployed youths into these factories… “When a state generates income it borrows less. This is the pathway to wealth creation and to mitigate debt.”
For a development economist, Dr. Chuiwaike Uba: “Mounting debt is not the real problem, but what the debt is spent (wasted) on. If the debts accrued are deployed to fund critical public goods such as education, health (particularly basic education and primary health healthcare), water, sanitation and hygiene, security, infrastructure, and food, the poverty level would have been minimally reduced”
A quick look at the multidimensional poverty report shows that most states are so poor even when they have received so much from FAAC, and have accrued so much debt. This clearly shows that the monies they received were spent on frivolities.”
Uba, a senior public policy and public financial management consultant continued: “Most states owe huge sums of monies in salaries, pensions, and other contingent liabilities, yet annually, so much is budgeted for car purchase and other things that add little, or nothing to the economy of the nation, especially, the states.
“Most of the governors are not focusing on addressing the challenges facing their respective states. They are obsessed with politics/politicking, instead of facing governance, which is why they were elected. Do you know how much most state governors spend daily dashing money on visiting politicians? Monies that would have been used to provide goods, and services for the public good,” he asked.
“The Federal Government is also playing the same card with the states – lack of focus on the real challenges. For example, what use are the billions that are being spent on various social safety net interventions when efforts are not being made to create jobs? Dash money can never solve the problem of poverty. Productivity is the solution. If the Federal Government can re-channel/spend just a quarter of the funds that are being spent on these non-productive and poverty-reducing programmes to the establishment of cottage industries in all local councils, provide basic infrastructure, fund SMEs after building their capacity on financial management, among other skills, poverty will come down. We need to be more productive to address the rising inflation and naira depreciation. It’s only when we have dealt with these basic challenges that we can begin to address poverty. Also, there is a lack of synergy between the national and subnational governments in program planning and implementation. Unfortunately, the lack of cohesion is also manifesting in the duplication of efforts, wastes, inefficiencies, and challenges facing governments effort to combat poverty in Nigeria.”
Commenting on the country’s debt, Prof. Godwin Owoh, a debt management expert, said that the huge ways and means (WM) held by the Federal Government is an indirect tax on poor Nigerians, who should have been compensated for the burden that it inflicts on them through its negative impact on the value of the naira.
Owoh, yesterday, told The Guardian that most of the responsibilities that should be efficiently discharged to give the people an opportunity to create wealth and earn a decent living have been domiciled in the central government and that they have been relegated.
“The extensive constitutional power granted to the Office of the President does not give room for blame shifting. With the extensive issues included in the Exclusive Legislative List, the Federal Government should be empowered to make laws that affect the people directly,” Owoh said.
On his part, the National Coordinator of the Human Rights Writers Association of Nigeria (HURIWA), Comrade Emma Onwubiko, regretted that state governors were not living as though they recognise that their states are in crisis.
According to him, “They are not even bothered. Despite the misery on their doorstep, many of the states are still on a spending binge. The travel budget of a state governor is in most cases far bigger than the education budget of their states, even when the schools within their jurisdictions operate under trees, or are at best rag-tag enclosures with squalid infrastructure. “Many of the state governments have scores of agencies and commissions which add no value to governance. Huge sums of money are expended annually on aides, with no defined jobs.”
He said the heavy debt burden implies that poverty is spreading, “so many states are collapsing …citizens cannot find jobs, and states are not building functional infrastructure to attract investors. Remember if there are no jobs, the people will look for ways to survive, and in most cases, they engage in crime. This is why the crime rate is increasing.”
Onwubiko wondered why agencies like the Economic and Financial Crimes Commission (EFCC) which is supposed to monitor fiscal responsibility among government agencies and state governments cannot checkmate what he called reckless state governors.
“They have failed because they can’t tell us that they don’t have records of how the states are borrowing and what the money is used for … what we need to do is for all the governors that have left office with a huge debt for their successors to be invited by the EFCC to give an account of how they borrowed and what they did with the funds, if they fail to give a good account, they should be made to refund the money or be jailed.”(The Guardian)
