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Tuesday, June 23,
2020 / 05:30 AM / by Proshare Content/ Header Image
Credit: EcoGraphics
To understand the effects of
COVID-19 on Nigeria's various states, a deep dive into their debt profiles tells
a compelling story of financial leverage going awry, especially when placed
side-by-side with their federation account allocation (FAAC) and internally
generated revenues (IGR). The spread of COVID-19 across states is gradually
turning budgetary challenges into fiscal nightmares as many states see their
wallets depleted as their debt service obligations outrun their revenues and
leave recurrent expenditure thin and vulnerable. The gaps between recurrent
fiscal revenues and expenditures will poke large holes in the state's 2020
fiscal strategies. Each region has states that stick out like sore thumbs for
high levels of foreign and local debt. In a pos-COVID-19 era, this could prove
damaging to fiscal sustainability as FAAC revenues begin to slide downwards
from Q2 2020 through to Q1 2021 (see chart 34 above).
State Debt Bungee
Dive By Regions
Most states in Nigeria
generate little revenue outside of their monthly FAAC allocation. The majority
of states depend almost exclusively on monthly allocations of federal revenues,
which has declined significantly with the fall in global crude oil prices. Many
states have therefore resorted to borrowing to meet their salary obligations,
often at exorbitant interest rates as high as 25%.
Some of Nigeria's richest
states are equally its most indebted, with the examples of Lagos state, Osun
state, Cross Rivers state, Kaduna state and Edo state. State governments,
therefore, need to tremendously embrace a high level of transparency and
accountability, develop workable economic plans, take haircuts-especially on
overheads-expand their internally generated revenue (IGR) base, and cut down on
debt accumulation without a concrete repayment plan. They owe the most both in
terms of overall dollar amounts and as a percentage of internally generated,
non-federally derived revenues. Lagos state had an external debt of $1.4bn
which was more than ten times the size of the debt of other sub nationals in
the country. The top regions with the highest accumulation of external debt in
December 2019 were the South-West and North-West region with an external debt
of $1.87bn and $848.28bn respectively. While regions with the highest level of
domestic debt as of December 2019 were South-South region and South-West region
with a total accumulated domestic debt of
N1.15trn and N971.15bn respectively (see Table 19).
Table 19: External
and Domestic Debt by Regions as of December 2019
Table 19: External
and Domestic Debt by Regions as of December 2019
South-West External
Debt and Domestic Debt
The total external debt for
the South-West region stood at $1.87bn in December 2019. The top three states
in the region with the highest amount of debt were Lagos State, Ekiti State and
Ogun State with an external debt of $1.4bn, $102.97bn and $100.61bn
respectively (see Chart 43).
Chart 43:
South-West External Debt ($'m) as of December 2019
Source: DMO,
Proshare Research
South-West total domestic debt
stood at N971.15bn as of December 2019. The top three states with the highest
amount of domestic debt were Lagos State, Ogun State and Osun state with
domestic debts of N444.23bn, N142.29bn, N138.65bn respectively (see Chart 44).
Chart 44:
South-West Domestic Debt (N'bn) as of December 2019
Source: DMO,
Proshare Research
North-West External
Debt and Domestic Debt
North-West external debt stood
at $848.28m as of December 2019. The top three states with the highest external
debt were Kaduna State, Katsina State and Kano State with external debts of
$554.78m, $79.09m and $69.11m respectively (see Chart 45).
Chart 45:
North-West External Debt ($'m) as of December 2019
Source: DMO,
Proshare Research
While its domestic debt stood
at N475.24bn as of December 2019. The top states in this region with the
highest domestic debts were Kano State, Kaduna State and Zamfara State with
debts of N107.75bn, N78.9bn and N70.84bn respectively (see Chart 46).
Chart 46:
North-West Domestic Debt (N'bn) as at December 2019
Source: DMO,
Proshare Research
South-South
External Debt and Domestic Debt
South-South's cumulative
external debt as of December 2019 stood at $733.38m. Edo State's external debt
of $275.93m was the highest in the region while Akwa Ibom recorded the lowest
external debt of $47.98m as of December 2019 (see Chart 47).
Chart 47:
South-South External Debt ($'m) as of December 2019
Source: DMO,
Proshare Research
The South-South region
recorded the highest domestic debt of N1.15trn as of December 2019. Rivers
state recorded the highest domestic debt of N266.94bn while Edo state recorded
the lowest debt of N95.69bn as of December
2019 (see Chart 48).
Chart 48: South-South
Domestic Debt (N'bn) as of December 2019
South-East External
Debt and Domestic Debt
South-East external debt stood
at $458.64m as of December 2019. Enugu State recorded the highest external debt
of $124.01m while Imo State recorded the lowest external debt of $64.76m as of December 2019 (see Chart 49).
Chart 49:
South-East External Debt ($'m) as of December 2019
Source: DMO,
Proshare Research
South-East domestic debt stood
at N374.89 as of December 2019. Imo state recorded the highest domestic debt of
N164.44bn while Anambra State recorded the lowest domestic debt of N33.92bn (see Chart 50)
Chart 50:
South-East Domestic Debt (N'bn) as of December 2019
Source: DMO, Proshare Research
North-East External Debt and Domestic Debt
The
North-East recorded an accumulated external debt of $343.89m as of December
2019. Bauchi state recorded the highest external debt of $133.9m while Borno
State recorded the lowest debt of $17.11m in the region (see Chart 51).
Chart 51:
North-East External Debt ($'m) as of December 2019
Source: DMO,
Proshare Research
The
North-East recorded an accumulated domestic debt of N482.74bn as of December
2019. Adamawa State recorded the highest domestic debt of N102.41bn while Yobe State recorded the
lowest domestic debt of N28.98bn in the region (see
Chart 52).
Chart 52:
North-East Domestic Debt (N'bn) as of December 2019
Source: DMO,
Proshare Research
North-Central External Debt and Domestic Debt
North-Central
region recorded the lowest external debt of $302.42m as of December 2019. Niger
State recorded the highest external debt of $69.99m in the region while FCT
recorded the lowest external debt of $30.44m in the region (see Chart 53).
Chart 53:
North-Central External Debt ($'m) as of December 2019
Source: DMO,
Proshare Research
The
North Central's domestic debt was N653.54bn as of December 2019. Plateau State recorded
the highest domestic debt of N134.01bn while Nasarawa State recorded the lowest
domestic debt of N56.51bn in the region (see Chart 54).
Chart 54:
North-Central Domestic Debt (N'bn) as of December 2019
Source: DMO, Proshare Research
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