The Fiscal Responsibility Commission (FRC) reports that over 23 state governments have breached the Debt Management Office (DMO) guidelines on subnational borrowing by exceeding their borrowing limits. The Commission in its latest report listed Lagos, Kaduna, Cross River, Gombe, Ekiti, Edo, Imo and Ondo states as those that have borrowed more than 50% of their annual statutory allocations in 2015.
The Commission listed the other states as Zamfara, Adamawa, Oyo, Abia, Ogun, Taraba, Kebbi, Enugu, Bauchi, Nasarawa, Kano, Benue, Kwara, Katsina and Sokoto.
“In the light of the DMO’s Guidelines on Debt Management Framework, particularly as it pertains to debt sustainability, the debt to income ratio of states should not exceed 50 per cent of the statutory revenue for the preceding 12 months. In effect, state governments have a subsisting, though not in line with FRA, 2007, loan policy, which requires states governments not to owe more than 50 per cent of their statutory revenue for the previous 12 months."
“The Federal Government, on the other hand, is expected not to accumulate debt more than 40 per cent of the national Gross Domestic Product. Bearing this in mind, 23 states exceeded the threshold of 50 per cent of their gross/net statutory allocations during the year 2015. However, out of the 23 states, only 20 states exceeded the threshold of 50 per cent of their total revenue – gross statutory allocation plus Internally Generated Revenue.”
Lagos exceeded the threshold of 50 per cent of its gross statutory allocation by well over 300 per cent; Kaduna, Cross River, Gombe, Ekiti, Edo, Ondo, Oyo, Abia and Ogun exceeded the 50 per cent of their gross statutory allocations by well over 50 per cent but less than 100 per cent. Imo, Zamfara, Adamawa, Taraba, Kebbi, Enugu, Bauchi, Nasarawa, Kano, Benue, Kwara, Katsina, and Sokoto states exceeded the 50 per cent of their gross statutory allocations by less than 50 per cent.
On the basis of total revenue rather than gross statutory allocation, 20 states exceeded the threshold of 50 per cent. Of the 23 states that exceeded the threshold of their gross/net statutory allocations, Kwara, Katsina and Sokoto states did not exceed the 50 per cent threshold of their consolidated debt to total revenue.
From 2012 to 2015, five states consistently exceeded the threshold of 50 per cent of their gross statutory allocations. The states are Kaduna, Lagos, Ogun, Cross River and Osun.
