28 STATES AND THE DEBT BURDEN
The states should be creative and become centres of productive activities
The 2018 introduction of the World Bank-assisted States Fiscal Transparency and Accountability Programme (SFTAS) was to nudge sub-national governments into imbibing fiscal transparency and tame their appetite for indiscriminate borrowing. Unfortunately, the programme has not worked. If anything, recent statistics from the Debt Management Office (DMO) present disturbing signals that just as the government at the centre goes on a borrowing binge, the states are also neck-deep in debt accumulation.
Available reports indicate that no fewer than 28 state governors who are either leaving office on May 29 or running for re-election, as well as the Minister of the Federal Capital Territory (FCT) had, as of 30thSeptember 2022, piled up about N5.36 trillion in sub-national domestic debts. This figure is bound to be much higher when updated. The sub-national debts are classified into domestic borrowings from local creditors and external borrowings from foreign creditors like the World Bank.
Governance without management is a viral affliction that has come to affect both the federal government and the states in recent times. Unfortunately, the template under which state governments exist as mere pay offices for redistributing the monthly proceeds of oil rent from Abuja is fast losing value. As oil prices plummet and the number of oil producer nations multiplies, there may soon be little or nothing to re-distribute. The states must therefore become centres of productive activities. But that would require a critical review of the socio-economic system operated in the country.
According to the World Bank, states’ debts will rise above 200 per cent of revenue this year. How these states will survive in the face of the increasingly asphyxiating fiscal squeeze exacerbated by poor revenue generation presents a jigsaw puzzle. What compounds the situation is that most of these debts being incurred for future generations of Nigerians are expended on projects that bring little or no returns on investment.
The Nigeria Governors’ Forum (NGF), the umbrella body for the 36 states governors, admitted recently that most states were already experiencing fiscal stress and that continued decline in their revenue from the federal purse might cause crisis in meeting their recurrent expenditures. Many states are not only owing backlog of workers’ salaries and pensions, but they are also yet to implement the National Minimum Wage of N30,000 signed into law since 2019. This is despite the stagflation in the land which has pushed the cost of goods and services beyond the reach of majority of Nigerians.
Regrettably, despite the misery at their doorsteps, many of the governors are yet to adjust to the prevailing realities as they continue to indulge in ostentatious lifestyles and investing scarce public funds on frivolities. They still funnel public funds to political activities while the burial and wedding ceremonies of family members of top public officers are turned into state carnivals at huge cost. Ironically, while the humongous debts hang precariously on the neck of these states, some of them like Abia and Delta States among others, are moving to borrow more. We believe that the current challenge does not call for more borrowing, but rather creative resource management and potent revenue generation drive.
Indeed, the rising debt profile raises serious concerns, as most of the states have feeble revenue base. But federal bailouts and emergency handouts will not chase away the problem. Nor will mass retrenchment help in an economy where unemployment and plain poverty have reached emergency dimensions. What the situation therefore calls for is a serious re-think of the fundamental assumption of our fiscal arrangements. The feeding bottle mentality must begin to give way to a better public finance management system anchored on result-oriented revenue generation mechanism.
