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Thursday, June 11, 2020 / 10:26 AM / By FBNQuest
Research / Header Image Credit: AllAfrica
From
our chart today we can see that the growth of the states' domestic debt stock
has started to slow. The increase in 2019 was just N260bn, compared with the
previous year's N500bn. (The stock does not include naira-denominated bond
issuance.) The states would have liked to have borrowed more, we assume, but
their finances are subject to greater supervision by the federal finance ministry,
the DMO and the Securities and Exchange Commission. They benefited from six
separate measures of debt relief in the first term of the Buhari
administration.
The share of Lagos State amounted to 10.8%, representing N440bn. Its
share of states' external borrowing at end-2019 was 30.6%, representing
US$1.40bn. The most indebted state by some distance in both measures, Lagos is
the best placed to meet its debt obligations by virtue of its successful
harvesting of internally generated revenue (IGR).
In July 2019 Lagos received N11.4bn net from the Federation Account
Allocation Committee (FAAC) after payments of N930m on external debt, N2.0bn on
domestic debt and another N1.0bn deduction from its share of the VAT Pool. The
data are lifted from the latest report from the office of the
accountant-general of the federation.
Three states received a higher net payout than Lagos. All three (Akwa
Ibom, Delta and Rivers) are oil producing beneficiaries of the 13% derivation
formula.
Domestic debt stock of states (N
trn; end-period) |
|
Sources:
Debt Management Office (DMO); FBNQuest Capital Research |
The states are set to see a sharp decline in their monthly distribution
from FAAC when we recall the crashing oil price in March and April. (Nigerian
crude is generally sold three months forward.) One state governor has suggested
that the payout for the three tiers of government in July (from June's revenue
in the federation account) may fall short of N200bn. The average over the last
12 months has been N693bn.
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