Ex-Govs Incur N1.58TRN Debt for 21 states

A month long investigations by Nigerian Pilot has revealed that 21 state governments in Nigeria owe an estimated debt of N1.58 trillion (domestic and foreign debts) as at May 29, 2015.

Top on the list is Lagos State under former Governor Babatunde Fashola with N418.2billion, followed by Kano during the administration of Dr. Rabi’u Kwankwaso with N294.5billion and Rivers led by Rotimi Amaechi N138.3 billion and Jigawa under Sule Lamido (N117).

Except Lamido, the other three former governors were elected or defected to the All Progressives Congress, APC, which at present controls the Federal Government and most states of the federation.

Other highly indebted states are Akwa Ibom (Godswill Akpabio-N125.7bn); Plateau-N104bn (Jonah Jang); Kaduna-N71bn (Ramalah Yero); Niger-N57bn (Babangida Aliyu); Zamfara-N53bn); Benue -N31.6bn (Gabriel Suswam); Osun-N25.4bn (Rauf Aregbesola); Imo-N32.4bn (Rochas Okorocha); Adamawa-N22.4bn (Murtala Nyako); Cross River-N38.3bn (Liyel Imoke); Edo-N34.6bn (Adams Oshiomhole); Ogun-N27.8bn (Ibikunle Amosun); Oyo-N32.6bn; Kwara-N28.7bn; Anambra N17.6bn (Peter Obi); Bauchi N17.5bn (Isa Yuguda) and Ebonyi N10.5bn (Martin Elechi) and Abia N6.76 bn (Theodore Orji).

While most of the highly indebted states have accumulated debts through issuance of bonds, Abia State has been very cautious about doing this, hence its position as one of the least indebted states.

Nevertheless, the survey showed that all the states are indebted except Katsina which is debt-free.

Nigeria’s total public debt stock, according to the Debt Management Office, DMO, as at December 2014 stood at about $67.73billion and N11.2trillion, which is about N1.2trillion higher than the 2013’s figure of N10.04trillion.

According to Nigeria Pilot, a  breakdown of the figures showed that external debt, including those of the states, was $9.71 billion and N1.63trillion.

The Federal Government’s domestic debt was $47.05billion and N7.9trillion, while those of the states stood at $10.97billion and N1.708trillion.

Based on the huge debt profile of the state governments, the Federal Government had last year directed Deposit Money Banks not to grant fresh loans to state governors until they get approval and clearance from the Federal Ministry of Finance.

The directive had stirred misgivings from most state governments, which accused the Federal Government of attempting to frustrate them from securing funds from banks to settle contractors and finance ongoing developmental projects.

According to the immediate past Minister of State for Finance, Bashir Yuguda, “The domestic debt profile of some states is scary. The states are so much in debt that only a small amount of their allocations get to them at the end of the day, because most times, money for debt servicing is removed from source.”

The former minister said this was the reason the Federal Government had to discourage states from further borrowing.

Even where it becomes necessary that they must take such loans, the minister said they must be for the execution of priority projects with prospects of high returns to service those loans on schedule.

Commenting on the situation, World Bank Consultant and former Abia State Finance Commissioner, Dr. Phillip Nto, blamed it on lack of frugal management of resources and penchant by some immediate past state governors for bonds.

“Ordinarily when you collect bond, you are mortgaging your future because you pay over a long period of time. A good governor that feels that it is not proper to mortgage the future of his state will not go for bond. For instance, Abia State is trying to come out from the mess, the monumental difficulty which it was pushed into in early 2000, that was why Governor Theodore Orji did not take any new bond, so for the state to be mortgaged again means that the state will be declared insolvent,’’ he said.

Observers attribute the inability of many states to pay staff salaries to the debt issue. As at press time, the following states are owing workers’ salaries running into several months: Abia, Akwa Ibom, Bauchi, Benue, Cross River, Ekiti, Imo, Jigawa, Kano, Katsina, Kogi, Ogun, Ondo, Osun, Oyo, Plateau, Rivers and Zamfara.

With the above scenario, concerns are being expressed about the future of some indebted states with some Nigerians calling for mergers or return to the old regional system of government. Others canvassed the pruning of government functionaries, retrenchment and salary cut.

Already, Kaduna State Governor, Mallam Nasir El-Rufai and his deputy have announced 50 percent cut in their respective salaries.

For instance, DMO recently warned that the financial position of states such as Akwa Ibom, Edo, Kwara, Ondo, Plateau and Taraba are already precipitating to insolvency.

DMO had earlier placed states of the federation into three categories with regards to their solvency profile. While some states are already in the danger mark as a result of their high level of indebtedness, others are considered close to critical on the domestic debt sustainability analysis scale.

Bayelsa, Cross River, Delta, Zamfara, Kogi, Ebonyi and Adamawa states, according to the report of domestic debt sustainability analysis undertaken by the DMO, are all on danger list.

The report presented to the National Executive Council, NEC, by the DMO showed that seven states’ domestic indebtedness relative to their internally generated revenue, IGR, capacities is beyond the recommended international debt threshold of between 92 and 167 per cent.

New Lagos State Governor, Akinwunmi Ambode, inherited a debt burden of N418.2 billion accumulated by the immediate past government of Babatunde Fashola. A breakdown of the debt showed that Fashola’s government has a domestic debt in the tune of N69.666 billion, obtained from funds borrowed from banks; N225 billion from bond issuance and N207.499 billion external loan from foreign agencies . Kaduna State debt comprised N46bn from Local Government Sources, N2bn Internal Bonds and N23bn pending arrears to contractors in the state.

In Ebonyi State, the debt profile excludes outstanding staff salaries. The governor, Chief Dave Umah, recently ordered permanent secretaries and directors of parastatals involved in the award and execution of contracts in the past eight years to provide details of such contracts for immediate scrutiny while his Rivers State counterpart, Nyesom Wike, last week ordered permanent secretaries to present 18 months accounts of their ministries.

But while Governor Simon Bako Lalong of Plateau State insists that the state debt is N104billion, his predecessor, Jonah Jang said that he left a debt profile of N18bn.

There is an indication that the huge debts are already taking their toll on some states. These include their inability to pay workers’ salaries and contractors for job done.

Already, some of the new governors have ordered reversal of the recruitment of members of staff conducted in the last two years, saying their government cannot employ more workers when they have no money to pay their present workforce.

Experts say the huge debts will make it difficult for the new state governments to embark on new development projects or employ fresh hands given the level of unemployment in the country.