Amid worsening revenue challenges, state governments’ indebtedness to commercial banks has risen to N2.2tn, findings by The PUNCH have shown.
The latest data from the quarterly statistical bulletin of the Central Bank of Nigeria, obtained by our correspondents, showed that states and LGAs owed banks about N2.21tn as of March 2023.
CBN data also revealed the states’ indebtedness rose from N1.97tn to the current figure, indicating an increase of about N240bn within the period under review.
Reacting to the development, state government workers and pensioners’ unions lambasted governors, saying the rising borrowing by governments had only worsened the finances of the states.
The National Union of Local Government Employees and state chapters of the National Union of Pensioners said the bank’s loans did not translate to better infrastructure and improved welfare for workers and pensioners.
Meanwhile, The PUNCH further observed the borrowing from banks was about 40.33 per cent of N5.48tn sub-national debt.
Data from the Debt Management Office showed that the 36 states and the Federal Capital Territory owed about N5.48tn as of March 31, 2023.
This was an increase of 13.22 per cent from N4.84tn domestic debt as of March 31, 2022.
Lagos was the top debtor with about N812.38bn as of March 31, 2023.
It was followed by Ogun (N293.2bn), Rivers (N255.51bn), Akwa Ibom (N206.64bn), and Imo (N202.55bn). Jigawa had the least domestic debt of N43.59bn as of March 31, 2023.
It was followed by Kebbi (N60.94bn), Katsina (N62.37bn), Nasarawa (N71.45bn), and Ondo (N75.51bn).
Meanwhile, about 25 states in Nigeria suffered a drop in their internally generated revenue in the first quarter of 2023, according to the budget implementation report of states analysed by The PUNCH.
The data showed that 25 states earned N182.26bn in Q1 2023.
This was a shortfall of 3.07 per cent or N5.77bn from the N188.03bn made in Q4 2022, based on a quarter-by-quarter analysis.
Although there are 36 states in Nigeria, Rivers and Sokoto have no data for Q1 2023 yet; Akwa Ibom has no data for Q1 2022, while Kwara, Edo, Kaduna, Lagos, Bauchi, Zamfara, Yobe, and Ogun have no data for Q4 2022.
Therefore, the figure for IGR was limited to 25 out of the 36 states in the country.
The PUNCH findings showed that the 25 states projected an IGR of N219.56bn for Q1 2023 but only made about N182.26bn.
A non-governmental civic organisation, BudgIT, in its 2022 State of States report, noted that states often rely heavily on revenue from the Federal Government.
The PUNCH also learnt that these 25 states have a total domestic debt of N3.12tn in Q1 2023, an increase of N130bn in three months.
In its December 2022 edition of the Nigeria Development Update, the World Bank noted that states’ debts would rise above 200 per cent of the revenue generated in 2022 and 2023.
The report read, “Debt levels for an average state are estimated to increase from 154.6 per cent of revenues in 2021 to above 200 per cent of revenues in both 2022 and 2023.”
According to the Washington-based bank, the increase in debts will be due to low allocation from the Federation Account, which will likely weaken the fiscal condition of the states.
It warned that many states would be unable to meet up with their expenditures, adding that there was an increase in debt servicing expenditures of states.
Worker protest
Reacting, the Chairman of the Association of Senior Civil Servants of Nigeria, Enugu State Chapter, Mr Igbokwe Chukwuma, said such borrowing did not translated to better welfare for workers.
He said, “That comes as a surprise to me. I can say that there is no evidence that such funds were used to pay the arrears of workers. States like Abia, Plateau, Benue, etc are still in arrears of salaries ranging from three to nine months.
“Except the states are still at the preparations stage to use such funds to pay salary arrears but we are not aware of any arrangement or pronouncements to that effect.”
Speaking with one of our correspondents on Sunday, the Head of Information of the National Union of Pensioners, Bunmi Ogunkolade, lambasted the governors saying the loans had yet to translate to a better life for residents, workers, and pensioners.
Ogunkolade said, “Can anyone of them come out plain to let us know the liabilities they met and the ones they offset? . There are some states that have been doing well, we have released their lists in the past, as well as those of states that are not doing well like the immediate past governors of Benue and Abia. Most of these states have not paid pension gratuities since 2010. So if someone is borrowing and is not disclosing what it is for, then that is daylight robbery. They often claim they are funding infrastructures.
“The N30,000 minimum wage that has been approved for over six years; yet only about 18 states are paying that rate. Some states have not even deliberated on this and they are going about borrowing money. These facts need to be exposed. Let the CBN always notify the public whenever these states borrow. Let everyone know. We can’t continue like this, we can’t continue to complain while the same thing continues to happen.
“On our own as NUP, we will continue to use every opportunity to talk about these issues. We will address a press conference and talk about these issues.”
The National President, NULGE, Hakeem Ambali said, “ It is evident that local government have not benefited from these loans.”
Also, the immediate past Chairman, NULGE, Anambra State chapter, Mr Cyril Okosa, said, “Unfortunately, the borrowing has not benefitted or translated to the welfare of Anambra workers. Workers have raised a lot of concerns as regards their take-home pay and working conditions, but their concerns have not been addressed while government appointees live in opulence, driving big cars with massive convoys.
“The worst-hit are the local government workers who don’t feel the impact of any welfare package from the government at all levels. Their monthly take-home pays can’t take them home anymore as inflation keeps rising.
“It is very unfortunate that the state governments have continued to borrow to service their personal lifestyle instead of spending it on infrastructure. Can anyone point at any tangible infrastructure they have used it for in the last two years?”
An economist, Paul Alaje, stressed that loans collected by state governments and the projects the governors spent the money on should be properly investigated.
He said, “Debts are like a burden, especially when the money collected is not spent on capital expenditure or projects that can create revenue for the government in the future. Most of the governors-elect have a lot of challenges because more than two-thirds of the states take allocations from Abuja and can barely pay salaries. As the value of the naira falls, it becomes worse for state governments, especially those whose predecessors have borrowed money on their behalf.”
A development economist, Aliyu Ilias, said that the states were yet to fully develop themselves as industrialised and marketable to attract investors.
Ilias urged the states to develop an area of strength they could leverage to attract foreign investments.
He said, “Going forward, what they could do is to identify one area of strength. For instance, Bayelsa has oil and should be able to attract. I think it is about policy. They should give the policy a chance that would allow people to come and invest. They should also create an attraction and develop an economic summit that will make sure they showcase and attract investors.”
A former General Manager, of Large Scale Industries, Bank of Industry, Joseph Babatunde, said that if the state government invested the loans in productive investments and projects, the states would be able to generate funds to service the debts and fund other projects.
Babatunde said, “There are so many steps you can take; debts can be renegotiated; you can ask for a little more moratorium or maybe an extension of tenor, depending on the nature of the source of loan. There are also cases, whether the debt is local or foreign, you can talk about the possibility of a debt swap, or maybe some long-term bonds to at least be able to generate enough resources.
A political economist, Prof Pat Utomi, had earlier urged states to create an environment for wealth creation rather than depend solely on the federal allocation.
He said, “States must focus more on creating the environment for wealth creation. If you go back to the late 50s and early 60s, most of the developments that took place in Nigeria are from the sub-national governments. They collected the revenues, and send 50 per cent of it to the centre but the military ruined all of that.”
