No cause for alarm if within the capacity of the governments and is well spent
AN update on the debt status of Nigeria’s 36 states and the Federal Capital Territory (FCT), Abuja, by the Debt Management Office (DMO) revealed that Lagos, Delta, Rivers and Akwa Ibom had the highest domestic debts in the country as of December 31, 2018. While Lagos State has a total domestic debt commitment of N530.24 billion, which represents 13.76% of the country’s sub-national domestic debt, Delta State has a domestic debt exposure of N228.81 billion or 5.94% of the sub-national debt portfolio. On its part, Rivers State recorded a domestic debt portfolio of N225.59 billion representing 5.85% of the gross domestic debt and Akwa Ibom with a domestic debt portfolio of N198.66 billion has a 5.16% share of the sub-national total domestic debt burden.
Other states with relatively high domestic debt burdens include Cross River (N167.96 billion), FCT administration (N164.25 billion), Osun (N148.1 billion), Bayelsa (N130.04 billion), Ekiti (N118.01 billion), Kano (N117.08 billion) and Plateau (N100.37 billion). It is instructive that the four states with the highest domestic debt ratios are also the most fiscally buoyant and viable sub-national governments in the country. This suggests that, all things being equal, the debts they incur are sustainable as their revenue stream puts them in good stead to meet repayment targets. While Lagos is the country’s industrial hub as well as commercial and economic nerve centre, Delta, Rivers and Akwa Ibom are all oil-producing states, which receive bountiful oil revenue dividends from the Federation Account.
Contrary to the conservative school of thought that perceives debt as inherently bad, borrowing could indeed be a positive handmaiden of development if undertaken with a keen sense of responsibility, transparency, accountability and prudence. It would make little sense, for instance, to borrow to meet recurrent expenditure or for vanity projects that cannot, in future, generate sufficient revenue to repay incurred debts. In this regard, Lagos State is a prime example of massive investment in infrastructure in such a way that continuously enhances the economic productivity and revenue generating capacity of the state.
The resort to borrowing by states to meet some of their developmental challenges is also partly a function of the defects in the practice of federalism in the country. Under the extant constitution, for instance, the Federal Government receives a more than proportionate share of national revenue, leaving a paltry share to the states and local governments, which are hardly able to meet their responsibilities. No attempt has been made to continually adjust the revenue allocation formula to reflect changing economic realities as provided for in the constitution.
Again, many states sit on rich deposits of natural and mineral resources, which they are unable to exploit as a result of constitutional encumbrances. This makes decentralisation of powers, responsibilities and resources to enhance the developmental capacity of the sub-national units of government a necessary condition for rapid socio-economic development in Nigeria.
Of course, with the growing level of indebtedness of most states, the need for good, responsible and responsive governance becomes even more crucial at the sub-national level of government. This means that state legislatures must begin to hold the executive to account rather than just being a rubber stamp for the whims of governors as is most often the case now. That will help to curb the high incidence of corruption as well as frivolous expenditure on the part of governors, which worsens poverty in the states. It will also help to reduce the need for states to resort to borrowing and even when they do, there will be a higher guarantee that the debts will be repaid on schedule.
