Editorial: On the rising debt profile of States

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Amid the apparent failure of the federal government to pay state governments their share of monthly allocation from the Federation Account (FA), the Buhari administration’s defensive fulminations at suggestions that the country is broke, amounts to an ostrich evasion that is a recipe for social cataclysm and possible violent implosion of the polity over a serious national issue that has well gone past crisis point. This is reprehensible and unacceptable. Of particular interest, is the rising debt profile of some states, with Lagos, Delta, Osun and Akwa Ibom leading the total debt profiles of state governments as at December 2016, according to the Nigeria Extractive Industries Transparency Initiative (NEITI). The total debt of the four states is estimated at N1.262 trillion representing about 38% of debts owed by all 36 states of the federation, which NEITI put at N3.442 trillion. With the economy stuck in recession; it takes only a short while before tensions begin to mount. As tensions rise and tempers flare, Nigeria, charged from palpitation of socio-political discontents, would easily be fanned aflame by what seems a disaster waiting to happen. Back from sick leave, President Buhari must deploy all the instruments of power at his disposal and act decisively to salvage a nation crumbling under the weight of corruption and ineptitude. Nigerians are tired of excuses; they deserve some respite.

In the third edition of NEITI Quarterly Review, a researched publication of NEITI, which focuses on Federation Account Allocation Committee (FAAC) disbursements in 2016, Lagos top the chart with an indebtedness of N603.25 billion; Delta (N331.95 billion); Osun (N165.91 billion) and Akwa Ibom (N161.23 billion), as at 2016. Other states with high debt burden include: Benue (N49.15 billion); Edo (N94.54 billion); Enugu (N57.56 billion); Ekiti (N67.3 billion) Kano (N81.05 billion); Katsina (N30.03 billion) and Ogun (N103.75 billion), as at 2016.

The publication with facts and data from the National Bureau of Statistics, Office of the Accountant General of the Federation, FAAC and Debt Management Office, is consistent with the mandate of NEITI on monitoring of fiscal allocation and statutory disbursement of revenues due to the three tiers of government. The review shows that Yobe (N11.74 billion) and Anambra (N20.60 billion) have the least debt burden as at the end of 2016. The NEITI publication expressed concern that the total indebtedness of N3.342 trillion by the 36 states represented 55.15% of the 2016 budget of N6.06 trillion and 45.8% of the 2017 budget estimates of about N7.3 trillion.

Despite federal allocation, many states, especially oil-producing ones are broke; or in the red. What is urgently needed is a public enlightenment campaign on the lack of viability of many states, vis-à-vis the country’s socio- economic and political reality. Conservative estimates by governance experts put the number of states that can survive without federal allocation, to no more than three. With a huge debt portfolio of N3.342 trillion, almost tripled the N1.42 trillion level of December 2012, the country’s 36 states and the Federal Capital Territory (FCT) are in dire financial straits. The Debt Management Office (DMO), which, in its latest report put the total liabilities at N1.86 trillion as at the end of June last year, said this figure was up from the N1.42 trillion level of December 2012.

NEITI’s legitimate interest in the debt profiles, revenue generation and management in Nigeria is as a result of the fact that over 70% of the revenues involved are derived from the extractive industry.

On internally generated revenue (IGR), Lagos and Rivers ranked highest with N301.2 billion and N82.1 billion generated by the respective states in 2016. This was followed by Ogun, Delta, Kano and Edo states with IGR records of N56.3 billion, N44.9 billion, N34.5 billion, N20.7 billion respectively. Nasarawa was last in IGR with N2.09billion. The review noted that ratio of IGR to budget was very low in most states except Lagos that recorded over 45% of its 2016 budget from IGR.

It is worth-noting that the contingent liabilities of these debtor states comprise local debt and a foreign component of their indebtedness. Paradoxically, on a debt solvency and liquidity ratio analysis relative to revenue inflow to states, the oil-rich states like Delta, Akwa Ibom and others are the heaviest debtors.

Given these unedifying statistics, it defies logic and basic public morality that the same people who are the victims of mismanagement and bad governance would come out in their numbers to celebrate the return of James Ibori; convicted former delta governor, and others like Godswill Akpabio, former Akwa Ibom governor, now sojourning in the Senate and others who left their looted states with generous retirement packages that border on insanity. More state governors and their cronies have joined the caravan of the rogues, becoming overnight millionaires and billionaires at the expense of the people and their future. The public service is full of people whose wealth and opulent lifestyle cannot be explained outside corrupt practices, and government at all levels has, of course, become the quickest route to free money and stupendous wealth. The impunity is too mind-boggling.

Presently, the states are drain pipes and electoral battlegrounds for self-aggrandizing political jobbers. If the country operated a system of good governance and accountability, efforts would rather be geared towards harnessing the existing states into viable units. The Buhari administration must also address the fundamental issue of local government as a tier of government which ideally is a contract between regions and the center in a manner that renders the contracting parties autonomous and coordinate. This is one issue that has been overlooked by past administrations; and it is an issue that will return to haunt the country unless decisive enough actions are taken and the political will to do the right thing is mustered to secure the rightfulness of local governments as an integral part of the federating units.

Truth be told: the current situation has far-reaching national security implications. Which is why it bears reminding the President that a time like this demands a leader that would stand up to be counted in action, not only in words. The alternative to restructuring the Nigeria federation to unleash the development capacity of the component units cannot be multiplication of the existing state structures, but rather; shrinking them into larger productive units in order to reduce the cost of governance and free resources for national development. Nigeria’s economy has been groaning under the weight of high governance cost which consumes 70% of its earnings to the detriment of capital projects. Infrastructure and other indices of development have been de-emphasized in order to foot the cost of governance.

The rising debt profile of states is a national emergency and a sad reflection on presidential leadership that could be interpreted as an act of nonchalance and a blatant endorsement of the status quo; which wittingly or unwittingly is pushing the nation towards the precipice. Preaching is not the solution. The buck stops at the President’s desk and any leader that perennially makes excuses only exhibits a lack of focus and opens himself to charges of cluelessness and failed leadership. Thankfully, Mr. President still has some time left in his tenure - if politics allows - to turn things around and prove himself as a man who can deliver on his promises; a President who fought the most, not just spoke out the most, on behalf of the Nigerian people. This is the time to deepen Nigeria’s democracy; and give it a new identity for it to live up to its billing as government of the people by the people and for the people.