PUNCH
Debt servicing costs incurred by 29 state governments consumed 80.7 per cent of their Internally Generated Revenue during the first six months of 2024, highlighting the significant financial burden the sub-nationals currently face, The PUNCH reports.
The dire situation also forced the governors to borrow a total sum of N446.29 billion within the same period despite a 40 per cent increase in its statutory allocation from the Federation Account.
The latest information is according to an analysis of data obtained by our correspondent using the budget implementation reports from each state’s website and Open Nigerian States. This BudgIT-backed website serves as a repository of government budget data.
The performance report is prepared quarterly and issued within four weeks from the end of each quarter.
This heavy burden underscores a critical issue in fiscal management, as the vast majority of the revenue that states could otherwise allocate to essential public services and development projects is being diverted to meet debt obligations.
It also reveals the severe constraints faced by state governments in managing their debt burdens inherited from previous administrations and addressing the needs of their residents.
Nigerians had hoped that with an increased statutory allocation of 40 per cent from the central government, state governors should have more than enough to fulfill their statutory obligations.
In 2023, state governors got the most FAAC allocations in at least seven years. The rise in FAAC allocations to the three tiers of government, especially states followed the petrol subsidy removal and currency reforms of the current administration.
The reforms have reportedly led to a 40 per cent boost in income. Experts believe the revenue increase should have reduced state governments’ appetite for more borrowing.
Instead, the sub nationals are spending a large chunk on repaying loans and taking more loans.
Recall that the PUNCH had reported that most of the Federal Accounts Allocation Committee funds for Osun, Ondo, Kaduna, and Cross Rivers states will be used in servicing debts this year.
This is because these states currently have a deficit of N10.94bn, N27.72bn, N15.83bn, N10.02bn respectively following debt servicing deductions by FAAC.
With such a large portion of revenue being used to service debt, it becomes increasingly challenging for states to achieve long-term economic stability and improve the quality of life for their residents.
Earlier this year, Kaduna State governor, Uba Sani had complained vehemently about the huge debt burden inherited from previous administrations, lamenting that it had stopped the prompt payment of salaries and more borrowings in the last nine months of his government.
