Abuja, Oct. 30, 2024 – The 36 state governments are owing N10 trillion debts, according to the BudgIT’s State of States’ Report for 2024.
BudgiT is a non-profit organisation in Nigeria that simplifies budget, promote transparency and foster active citizen engagement for institutional reforms and equitable society.
It said total debt stock of the 36 states surged by 38.1%, from N7.25 trillion in 2022 to N10.01 trillion.
According to the report released on Tuesday, the debt’s growth was partly driven by a N606.12bn increase in domestic debt.
The situation was further complicated by rising foreign debt which increased by 4.1%, from $4.43 billion in 2022 to $4.61 billion in 2023.
The liberalisation of the exchange rate exacerbated the financial strain on states, significantly raising their foreign loan repayment obligations in naira terms.
Lagos State remained the most indebted in foreign currency, accounting for 26.9% of the total foreign debt, equivalent to $1.24 billion.
The devaluation exposed many states to heightened financial risk, particularly the eight states where more than 50% of the total debt is dollar-denominated.
Kaduna and Edo had the highest foreign debt-to-total debt ratios, at 86.06% and 60.54%, respectively.
The other states in this group, Ondo, Bauchi, Lagos, Enugu, Ebonyi, and Anambra, had ratios ranging from 50% to 59%.
The debt burden also varied significantly across the country, with the average sub-national debt per capita reaching N40,469 in 2023.
Twelve states exceeded this benchmark, with Lagos having the highest debt per capita at N138,034.
In addition to the existing debt stock, the states have exiting liabilities totalling N1.19tn: N408.69bn is owed in contractor arrears, N521.36bn is owed in pension and gratuity arrears, N79.64bn is owed in salary and other staff claims, N4.36bn is owed in judgement debt and other pending litigation, and other payables and liabilities amount to N182.79bn.
The report advised that to achieve debt sustainability, states need to check their appetite for accumulating foreign loans amidst exchange rate volatility and shrinking fiscal space to minimise their exposure to unfavourable exchange rates.
“Domestic revenue mobilisation should be strengthened to reduce borrowing needs and budget deficits.
“States should implement fiscal reforms that broaden the tax base and formalize economic activities.
“Furthermore, states should establish robust frameworks for debt transparency and accountability, ensuring that borrowed funds are directed towards high-impact projects with clear economic returns.
“Enhanced coordination between federal and state governments is essential for monitoring debt sustainability and providing guidance on borrowing limits to safeguard fiscal stability,” BudgIT advised. (GBN)
