Thursday, December 07, 2017 / 9:35 AM /FBNQuest Research
In as much as
they have limited alternatives for generating revenue, most state governments
have suffered more from the slide in the oil price since mid-2014 than the FGN.
Their monthly payouts from the Federation Account Allocation Committee (FAAC)
have slumped, leading to the accumulation of salary and pension arrears.
In response, the
FGN has launched five domestic debt relief programmes. Yet in mid-2017 up to 20
state governments were still in arrears. Along with the slump in their monthly
income, states have laboured under heavy debt burdens.
external debt is captured in detail by regular DMO data releases. At end-June,
the total was US$3.94bn, of which Lagos and four other states accounted for
55.2% (see chart). The external debt of the other 31 states and the Federal
Capital Territory combined was just US$1.76bn.
debt is guaranteed by the FGN, and therefore appears in its total of US$15.05bn
as at June. The other point to make is that all the states’ debt is due to
multilateral and bilateral creditors, and on concessional terms.
the sake of clarification, we note that the reimbursements by the FGN to the
states for the overpayment of external debt service to the Paris Club and
London Club pre-2005 are being made in naira. The states are being compensated
for historic “over-deductions” by the FAAC in their monthly payouts. In May
they received a total of N244bn.
onerous debt burden of the states is domestic. These obligations amounted to
N3.18trn in June and are not guaranteed by the FGN, hence the latter’s relief
programmes. Because they are not guaranteed, we can speculate that they were
less scrutinised at the time of disbursement by the lenders (the banks). We can
be sure that they attract market rates of interest.
Still a Good Story for the Domestic Debt
FAAC Disburses N558.08bn in October 2017
A Decline in October 2017 FAAC Payout
Invest in FGN Monthly Bond Auction –
External Debt Ratios to Savour
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