08, 2017 3:03PM / Proshare Research
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The dip in oil price coupled with relatively low production led to erosion in government revenue. This dislocation exposed the weakness in Nigeria’s revenue pool. Interestingly, these structural fault lines rubbed on the states, as they had increased their debt levels, just like the Federal Government while the boom was on. Thus, the high dependency ratio on statutory allocation and weak internal generated revenue became inevitable.
The anti-clockwise movement in the cycle left the finances of states hard pressed, thereby leading to an automatic fall in consumption. Certainly states are limited with respect to fiscal multipliers, as they are not totally risk free. High oil prices had masked both the weak productive level of many states and the low taxable population. At the same time it brought to public consciousness, the size of total debt held by states.
Taking a clinical view at the productive level of each state have become necessary, so as to determine the productive capacity of each state of the federation. Moreover, it gives an insight on how resources are managed by each state over the years. A study of the size of public debt of each states and the trajectory of such debt is carried out in this edition of our Proshare Confidential Report.
In this edition, the debt of individual states is weighed against their level of productivity, as a measure of their fiscal sustainability. It also determines the chunk of total debt held by states to the aggregate credit over a 5 year period. Even though states are not totally risk free, they still enjoy preference over corporates on the risk ladder.
We also studied the external debt of states both prior to devaluation and post devaluation, to ascertain the needed hint on the direction and distribution of total external debt among states.
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As a follow up to the study, projected revenue of each states and their composition is made available. Thus it allows the study determine: