Thou shall not borrow, FG tells states

Bashir Yuguda, the minister of state for finance, says the federal government has discouraged states from further borrowing describing the country’s debt profile as “scary”.

In a lecture titled, ‘Nigeria’s Economic Policies and Reforms’ at the National Defence College, Abuja, the minister explained that most of the states were experiencing difficulties in servicing their existing debts adding that it would be unwise to add to those debt.

“The domestic debt profile of some states is scary. They are so much in debt that only a small amount of their allocations get to them at the end of the day. This is because most times, money for debt servicing is removed from source.

“This is the reason why we discourage them from borrowing. Even if they will, it has to be on prioritised projects with high returns. Prioritisation is key in this difficult time,” he added.

Yuguda said some of the states had become heavily indebted that they did not have enough revenue to service the loans they took and carry out other government activities, including payment of salaries.

The federal government last year issued a directive to deposit money banks that approvals must be granted by the ministry of finance before they granted loans to any state.

Findings from figures released by the Debt Management Office show that the country’s debt profile rose by about N1.2trn to N11.24trn in 2014 from N10.04trn recorded in 2013.

The figures show that the external debt stock of both the federal and state governments was N1.63trn, while the domestic debt stock for only the Federal Government was N7.9trn. The balance of N1.7trn was for the domestic debts of the states.