Lagos, Katsina among 23 states that ‘exceeded borrowing limits’

Lagos, Katsina among 23 states that ‘exceeded borrowing limits’
September 26
09:42 2017

The Fiscal Responsibility Commission (FRC) says 23 states exceeded their borrowing limits stipulated in the guidelines provided by the Debt Management Office (DBO).

A report on states and indebtedness said Lagos, Kaduna, Cross River, Gombe, Ekiti, Edo, Ondo and Imo states borrowed more than 50% of their annual statutory allocations in 2015.

Other states listed are Zamfara, Adamawa, Oyo, Abia, Ogun, Taraba, Kebbi, Enugu, Bauchi, Nasarawa, Kano, Benue, Kwara, Katsina and Sokoto.

The FRC added that when total revenue (gross statutory allocation plus internally generated revenue) was used as the yardstick for measuring the level of indebtedness of the states, a total of 20 states borrowed beyond limit.

“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% of the statutory revenue for the preceding 12 months,” the council said in a statement.

“In effect, state governments have a subsisting, though not in line with FRA, 2007, loan policy, which requires them not to owe more than 50% 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% of the national gross domestic product. Bearing this in mind, 23 states exceeded the threshold of 50 percent of their gross/net statutory allocations during the year 2015.

“However, out of the 23 states, only 20 states exceeded the threshold of 50% of their total revenue, which is gross statutory allocation plus internally generated revenue.

“Lagos exceeded the threshold of 50% of its gross statutory allocation by well over 300%.

“Of the 23 states that exceeded the threshold of their gross/net statutory allocations, Kwara, Katsina and Sokoto states did not exceed the 50% threshold of their consolidated debt to total revenue.

“From 2012 to 2015, five states consistently exceeded the threshold of 50% of their gross statutory allocations. The states are Kaduna, Lagos, Ogun, Cross River and Osun”.

The commission, however, said it was not safe to conclude that the states over-borrowed because the debt data had not been compared to the gross domestic product of the states.


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