Imo, Lagos, 5 others borrowed more than 50% of their annual statutory—FRC
Against the provisions of the guidelines of the Debt Management Office (DMO) on sub-national borrowing, 23 states lead by Imo and Lagos states, have borrowed more than 50 per cent of their annual statutory allocations by 2015.
This was revealed by the Fiscal Responsibility Commission (FRC) in Abuja recently.
The new report on the states and indebtedness, released by the FRC listed other states that had borrowed more than 50 per cent of their annual statutory allocations by 2015 to include Kaduna, Cross River, Gombe, Ekiti, Edo, Ondo and Zamfara states
Others in the crisis include Adamawa, Oyo, Abia, Ogun, Taraba, Kebbi, Enugu, Bauchi, Nasarawa, Kano, Benue, Kwara, Katsina and Sokoto states.
The commission, was however quick to state that it was not safe to conclude that the states over-borrowed because the debt data had not been compared to the Gross Domestic Product of the states.
In the views of the FRC, when total revenue (gross statutory allocation plus Internally Generated Revenue) was used as the yardstick for measuring the level of indebtedness of the states, a total of 20 states borrowed more than their total revenues in 2015.
FRC observed that “Lagos exceeded the threshold of 50 per cent of its gross statutory allocation by well over 300 per cent; Kaduna, Cross River, Gombe, Ekiti, Edo, Ondo, Oyo, Abia and Ogun exceeded the 50 per cent of their gross statutory allocations by well over 50 per cent but less than 100 per cent”.
“Imo, Zamfara, Adamawa, Taraba, Kebbi, Enugu, Bauchi, Nasarawa, Kano, Benue, Kwara, Katsina, and Sokoto states exceeded the 50 per cent of their gross statutory allocations by less than 50 per cent.
“On the basis of total revenue rather than gross statutory allocation, 20 states exceeded the threshold of 50 per cent. Of the 23 states that exceeded the threshold of their gross/net statutory allocations, Kwara, Katsina and Sokoto states did not exceed the 50 per cent threshold of their consolidated debt to total revenue.
“From 2012 to 2015, five states consistently exceeded the threshold of 50 per cent of their gross statutory allocations. The states are Kaduna, Lagos, Ogun, Cross River and Osun.
The report said in parts: “In the light of the DMO’s Guidelines on Debt Management Framework, particularly as it pertains to debt sustainability, the debt to income ratio of states should not exceed 50 per cent of the statutory revenue for the preceding 12 months”.
“In effect, state governments have a subsisting, though not in line with FRA, 2007, loan policy, which requires states governments not to owe more than 50 per cent of their statutory revenue for the previous 12 months.
“The Federal Government, on the other hand, is expected not to accumulate debt more than 40 per cent of the national Gross Domestic Product. Bearing this in mind, 23 states exceeded the threshold of 50 per cent of their gross/net statutory allocations during the year 2015.
“However, out of the 23 states, only 20 states exceeded the threshold of 50 per cent of their total revenue – gross statutory allocation plus Internally Generated Revenue.”
