In spite of the N16 trillion allocated to the states and local governments from the Federation Account Allocation Committee (FAAC) in less than four years, it is regrettable that the cost of living is rising across the country. Latest survey shows that prices of essential food items and drugs have risen by over 200 per cent since December, 2023, according to figures from the National Bureau of Statistics (NBS). The NBS Living Standards Survey also shows that no state in the country is spared of the economic hardship. Unfortunately, the 23 per cent increase in the federal allocation in the last few months to sates and local governments has not impacted so much on the standard of living of many Nigerians.
While the prices of food items are rising, the wages of the workers remain the same. Inflation rate for December 2023 was put at 28.92 per cent. The development has exacerbated the cost of living as well as the poverty index. On a year-on-year basis, food inflation rate rose to 33.93 per cent compared to the corresponding period of December, 2022 at 23.75 per cent. This means that the monthly income of an average Nigerian is very low. Many manufacturing companies have shut down operations on account of rising cost of production and low profits.
The NBS poverty survey in 2022 showed that about 133 million Nigerians or 63 per cent were multi-dimensionally poor. Many states are grappling with mounting debts. Across states, poverty remains highest in the North-West, followed by North-East and North-Central. According to the Debt Management Office (DMO), most states are already showing signs of financial distress. Sadly, the hardship in the country has not stopped the profligacy across the states.
Statistics show that Lagos, Delta, Ogun, Akwa Ibom and Imo states owe 34 per cent of states’ N5.34trillion domestic debts, while their external debt has risen to N3trillion. This is 16.47 per cent increase of the total domestic debt from N4.458trillion as at the end of 2021. Of the total, Lagos owes the highest debt of N960.49billion, followed by Delta State (N304.24billion). Ogun state ranks third with a total of debt of N27045billion, while Akwa Ibom and Imo states have a total domestic debt of N219.26billion and N204.22 billion, respectively. Abuja (N138.78 billion), Niger (N120.19 billion), Zamfara (N96.77 billion), Borno (N102 billion), Ondo (N72.75billion), Bayelsa (N129billion), Edo (N126.26 billion), Enugu (N92.21 billion) and Kano (N92.32billion).
In all, Jigawa is the least indebted state with N43.95billion as at December, 2022, followed by Kebbi State (N61.31billion). The debt profiles of the states are undoubtedly worrisome and must be checked. It can mortgage the future of the states and worsen the misery index. The recent report that 13 states are planning to borrow N2.3trillion this year to fund their budget deficits is uninspiring and should be discouraged. We say this because fresh borrowing will increase their debt profile to about N4.73trillion. As at September 2023, figures from the DMO showed that states’ domestic debt amounted to N2.61trillion. Also, data from the Nigeria Extractive Industries Transparency Initiative (NEITI) indicated that between 2020 and 2021, the states shared N8.8trillion and N3.16trillion in 2022.
In the first half of 2023, N1.15trillion was disbursed to the states. For instance, in July 2023, they received N966billion, in August, N1.1trillion, September, N903billion and October 2023, N906.9billion, bringing the total amount shared among the states to N15.58trillion in almost four years (2020- October, 2023). With dwindling internally generated revenue (IGR), most states depend on Abuja for survival. At the end of 2020, DMO put the domestic debt of the states at N4.18trillion. The figure rose to N4.45trillion in 2021, N5.33trillion in 2022, and N5.815trillion in the first-half of 2023.
The accumulation of these debts are unsustainable. The debts are affecting the ability of the states to meet their financial obligations. While a few states can do so much from their IGR, others cannot. Let the states drastically reduce the cost of governance, which is very high. They should also ensure effective implementation of their budgets.
The inability of the state legislatures to hold the governors accountable has not helped matters. The governors should not be allowed to run the states as private estates. Loans are meant to fund key projects for economic development and generate the income for their repayment. Accumulation of debts is unacceptable. We urge the governors to initiate measures that will reduce the economic hardship in the country.
Besides, there is need to strengthen macro-economic policies that will bolster long-term growth potential. This is the time to diversify the economy and develop human capital. At both federal and subnational levels, every rescue plan for the economy must address squarely the present hardship across the land.