State and Local Govts | |
State and Local Govts | |
1192 VIEWS | |
![]() |
Tuesday, August 11 2020 / 11:28
AM / by FBNQuest Research / Header Image Credit: AARP/Ecographics
The
domestic debt of state governments at end-March amounted to N4.11trn,
equivalent to 2.9% of GDP and unchanged from three months previously. It
increased by N840bn in 2015 alone, which saw the first of five debt relief
packages launched by the FGN over two years. The annual rise in the burden has
since slowed: the states are now subject to greater regulatory oversight and
banks have generally lost their appetite to lend to states due to the weakness
of the oil price and its impact on the monthly distributions by the Federation
Account Allocation Committee (FAAC), on which most states depend.
The five largest debtors at end-2019 were Lagos, three oil producers and
Cross River. They made up 32.7% of the total, leaving the sizeable balance
divided between 31 state governments and the Federal Capital Territory.
At end-2011 the five were the same states except that Bayelsa, another
oil producer, was briefly the leading debtor.
As with external borrowings, Lagos State is the largest domestic debtor
in terms of bank borrowings and bond issuance (see below). Its accounts for
2019 tell us that it is well placed to meet its obligations. We see total
revenue of N645bn, in which internally generated revenue (N348bn) comfortably
exceeded statutory allocations from the FAAC (N230bn). Net earnings of N366bn
were translated into an overall surplus of N67bn after capital items,
depreciation and public debt service (N63bn).
Domestic
debt of state governments (N trn; end-year) |
|
Sources:
Debt Management Office (DMO) FBNQuest Capital Research |
This data series excludes the issuance of naira-denominated bonds, which
currently amount to N390bn in total. Lagos alone accounts for N330bn and is the
last state government to have come to the market (several times) since Cross
River in May 2015. Coupon payments and principal repayments are deducted from
the monthly distributions by the FAAC.
Related News