About two weeks after the inauguration of the new administration, many state governments are reportedly grappling with effects of treasury stripping, backlog of unpaid workers’ salaries, gratuities and pensions of retirees and other unpaid benefits of former political appointees and other liabilities. Many of the new governors are complaining that the mounting debts left behind by the former governors are hampering a smooth transition. The inherited huge debt burden may affect them in fulfilling their campaign promises to the people.
According to data from the Debt Management Office (DMO), 18 newly elected state governors across the country are saddled with a total debt burden of over N3trillion. The hefty debts include N2.27trillion domestic debt and N1.71trillion foreign loans. The external debt alone amounts to N787.5 billion at the current Central Bank Nigeria (CBN) exchange rate of N460.53/$. The states mostly affected by the debts left behind by the erstwhile state chief executives account for 42.5 per cent of the N5.34trillion total domestic debt in the country. It also represents 38.34 per cent of the $4.46billion of total foreign borrowing.
Figures from the DMO and the National Bureau of Statistics (NBS) show that top domestic sub-national debtors include Lagos State with N807 billion; Delta, N304.25billion; Rivers, N225.51billion; and Akwa Ibom, N219.27bilion. Among top foreign state debtors are Lagos, with N1.33trillion. This represented about 34 per cent of the total debts of other state governments combined at June 2022. Kaduna State is ranked second with external debt of $586.7 million, Edo, $268.3million, Cross River, $215.7million. Other states’ huge external debt include Bauchi with $172.7million, Rivers, $140million, Enugu State, $123million, Ogun, $122.7million, and Kano, $109.4million. Least indebted states are Jigawa and Kebbi.
Despite the huge debt, there is public outcry over the humongous amount of state funds appropriated as severance package for ex-governors and other political appointees, which came under a new pension law hurriedly enacted by the various State Assemblies before May 29. The jumbo packages include exotic cars to be changed every four years, 100 per cent payment of their basic salary while in office, 300 per cent of the ex-governors’ annual basic salaries as furniture allowance, medical services abroad, provision of entertainment, exquisite building in any part of the country of the ex-governors’ choice, among other perks.
Curiously, many of the affected states have not implemented the N30,000 minimum wage, amid rising cost of living. The removal of the fuel subsidy has apparently worsened the situation. It is unfortunate that profligacy has become a feature of our governance. This is probably why the national debt has risen to over N77trn. Moving forward, there is need for a drastic cut in the cost of governance at national and sub-national levels. Sadly, the 10 poorest states with a total debt of over N17trillion are among those that approved the humongous severance package for their immediate past governors.
According to the NBS Poverty Index report, about 133 million Nigerians are multi-dimensionally poor. This represents 63 per cent of Nigerian population in extreme poverty, with no access to education, health, and good living standards. The 10 poorest states in the North West, North East and North Central have a total of 86million poor people out of the total population of the country, while the South has 47 million poor people.
This ought not to be the case if the political office holders had been prudent with the resources of their respective states. State governors should be reminded that indicators that check the problem of debt sustainability include debt-to-revenue ratio, debt-to-GDP ratio and sustainability of borrowing. Therefore, we enjoin them to always borrow cautiously and avoid exceeding the acceptable borrowing threshold. State Assemblies should enact a law establishing debt management offices that will design short, medium and long-term strategies that can effectively balance cost and risk, and execute financing transactions. In addition, the states should develop a budget that will track their expenditure profiles and block leakages.
Going forward, there should be a moratorium on fresh loans, except if such borrowing is exceedingly necessary. Apart from reducing the high cost of governance, state governments should invest more in worthwhile projects and reduce their appetite for loans.