BY HABEEB I. PINDIGA AND NURUDDEEN M. ABDALLAH,
Despite assurances that the public debt stock is within manageable level, official data analysed by Daily Trust shows that many states lose large chunk of their statutory monthly allocations to debt service deductions, leaving small amounts for fresh projects.
Documents from the Debt Management Office and the Federal Ministry of Finance show that most of the 36 states are paying heavily for domestic and foreign debts that piled up over time, with some of them collecting just half of their monthly statutory allocations while the rest of it is held at source to settle debts.
For instance, Bayelsa State, which is the second biggest debtor with N167 billion, foregoes nearly all of its monthly statutory allocations, retaining only its own share of the 13 per cent derivation funds.cent derivation funds.
For the month of April, N2.37 billion was deducted from Bayelsa's N2.54 billion statutory allocation. But for the N12 billion derivation funds it collected, the state would have left the Federation Account Allocation Committee (FAAC) meeting almost empty-handed.
Edo State's debt service deduction for the month of March was N697 million out of its N2.9 billion statutory allocation. But it had N1.7 billion derivation fund to fall back on to.
Non-oil states are less fortunate in this regard, as after the debt deductions they have no plum derivation funds to augment their takings. Like the case of Lagos whose at-source deduction for the month of April was N1.5 billion, leaving it with N3 billion statutory allocation.
Based on the latest debt figures published by the DMO in December, the biggest debtors (domestic and external) are Lagos (N234 billion), Bayelsa (N167 billion), Cross River (N107 billion), Delta (N93 billion), FCT (N91 billion) and Rivers (N89 billion).
The biggest debtor states in the North is Kaduna (N63 billion), followed by Kogi (N39 billion), Kwara (N32 billion), Adamawa (N30.5 billion), Bauchi (N28 billion) and Plateau (N24 billion).
On the other hand, the three least indebted states in the country are Borno (N3.7 billion), Jigawa (N5.9 billion) and Yobe (N6.9 billion).
The domestic debts comprise commercial bank loans, state bonds, contractors' arrears, arrears on pensions and gratuities, salary arrears, other staff claims and other liabilities including judgment debts.
A former presidential economic adviser Professor Osita Ogbu said Nigeria's debt profile is becoming "odious".
"Many of us are concerned about domestic borrowing and the rising stock. But we should worry about rising external borrowing too despite our current low foreign debt service to export or debt to GDP," he said in a recent article published in Daily Trust.
"We should still worry for two reasons: our vulnerability due to over dependence on oil exports; and the policy dependence that ensues once you need external assistance to deal with your external debt obligations."
A DMO document shows that the 36 states and FCT's domestic and foreign debts are N1.572 trillion as of December 31, 2011, with the domestic component being N1.233 trillion (about 78.42 percent of the total) while foreign debt stock stood at N339 billion.
The DMO report, titled "Report on the Programme for the Establishment of Debt Management Departments and Domestic Debt Data Reconstruction in the 36 States of the Federation and the FCT," was dated December 2012 and is the last such report published by the DMO.
Though the DMO said the states' debts are still within the World Bank debts threshold sustainability ratio of 250 percent, the debts are apparently taking a toll on the states.
Even after this document was published, many states have taken additional loans, particularly external ones, further shaving off their net collectible monthly statutory allocations.
For instance, Kaduna State's 12-month average debt service deduction from FAAC in 2011 was N469 billion. The most recent FAAC figures show that in April 2013, Niger State's deduction was N353 million, Osun N637 million and Bauchi N257 million.
For the month of March 2013, N580 million was deducted from Kaduna's N4 billion allocation to service debts, Gombe paid N785 million out of its N2.8 billion allocation, Benue N486 million out of N3.4 billion and Edo N697 million out of N2.9 billion.
Prof. Ogbu said "the huge domestic borrowing has not translated into an expanded productive capacity: neither our physical nor human infrastructure has appreciated in both quantity and quality."
He said official data shows that domestic borrowing is rising and that the trend is worrisome.
"If we are devoting 20 percent of our revenue to debt servicing with huge infrastructural deficit both human and physical, we should worry. We should worry because the revenue required for the investment in the technology necessary for resolving manufacturing difficulties in the country, for the diversification of the economy and for social inclusion is going into debt service obligations," he said.
"Is Nigerian debt becoming odious? Are we witnessing rising debt with rising affluence of a few and rising inequality? Is public sector borrowing indirectly fueling the bank accounts of public and private sector individuals? Recent statistics reveal that a few Nigerians have gotten richer while the majority is stock in poverty," Professor Osita said.
Finance Minister Ngozi Okonjo-Iweala, in a statement sent to Daily Trust recently titled "Clarifying Nigeria's debts position" said the Federal Government was putting measures to control borrowing.
She said the Jonathan administration has "put in place several measures to limit and manage the national debt. There are a number of specific policies we have introduced in the current administration to slow down the increase in our overall debt stock. Our current approach balances Nigeria's needs for investment in physical and human infrastructure with a strong policy to limit overall indebtedness in relation to our ability to pay. Above all, any debts incurred must go for directly productive purposes which yield results that Nigerians can see."
The minister said "borrowing for recurrent expenditure or consumption, as was the case here is a practice that is less than ideal and one that we should endeavour not to repeat. We must learn that domestic debt should be incurred sparingly at modest and manageable rates so that government is able to service it and pay back domestic creditors. Failure to do so would severely undermine the finances of our private and institutional creditors to the detriment of the economy''.
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