STATES AND MOUNTAINS OF DEBTS
The current challenge calls for creative resource management
While decentralisation of government ordinarily presupposes that the nearer such institution is to the people the better, that has not been our experience. The unanswered question remains: How much development have the 36 states brought except the creation of a multiplicity of agencies that are neither accountable to the people nor serve their interests? In most cases, there are no roads, no provision of clean water for the rural folks who walk long distances to fetch water, no electricity, no medical facilities for the sick, and no schools for their children. To compound the problem, recent statistics from the Debt Management Office (DMO) indicate that many of the states are also neck-deep in debt accumulation.
In its December 2022 update, the World Bank revealed that states’ debts would increase above 200 per cent of the revenue generated in 2022 and 2023. According to the report, debt levels for an average state are estimated to rise from 154.6 per cent of revenues in 2021 to over 200 per cent of revenue in 2022 and 2023. Meanwhile, Nigeria’s total debt stock is projected to hit about N77 trillion in 2023, according to the DMO’s Director-General, Patience Oniha. But the main concern is about the states where new governors are not going to inherit not only empty treasuries but also mountains of both domestic and foreign debts. These sub-national debts are classified into domestic borrowings from local creditors and external borrowings from foreign creditors like the World Bank.
Incidentally, 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. How these states will survive in the face of the increasingly asphyxiating fiscal squeeze exacerbated by poor revenue generation presents a jigsaw puzzle. Sadly, most of the debts already 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 are preping 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 bailout 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 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.
