By Chima Nwokoji

 

States need 3times IGR, Finance minister to engage NSA, fourth industrial revolution, Defence estimates delaying , FG contributes N453.2m, Nigeria’s trade deficit, locally made vehicles, procurement law, CBN N45 billion monthly from TSA, N676.407 billion for July, FG spends N4.45trn in Q2, FAAC, Growing hunger, eligible states, Nigeria, grants, COVID-19,VAT by additional 2.5%

In the face of declining Internally Generated Revenue (IGR) and remittances from the Federation Accounts Allocation Committee (FAAC), pieces of evidence abound that state governments in Nigeria will need an amount that is at least three times their present IGR to settle their debt obligations, including the Budget Support Loans given to them by the Federal Government.

 

In a report made available to Tribune Online, a Lagos-based investment Banking and Research firm, Afrinvest (West) Africa Limited observed that oil revenue which for over two decades accounts for more than 60 percent of remittances to FAAC purse has declined significantly from a peak of N8 trillion in 2012 to a threshold of N3.5trillion.

 

Consequent to this and the inability of most sub-nationals to substantially increase IGR, states debt portfolios have increased nearly four-fold from N1.8trillion to N5 trillion in 2020.

 

“A pitch of IGR numbers against total debt shows that all except for the Federal Capital Territory (FCT) at 114 per cent have their annual IGR printing below 41 percent of total debt stock in 2020.

 

“This implies that all state governments except FCT will need a minimum of three times their 2020 IGR to offset their debt burden as of 2020,” the firm noted.

 

The Central Bank of Nigeria (CBN) Governor Godwin Emefiele recently said that state governments must begin to pay back the Budget Support Loans given to them by the Federal Government.

 

Emefiele said this while reacting to claims by Edo State Governor Godwin Obaseki that the Federal Government printed money to augment the March revenue shared by the Federation Account Allocation Committee (FAAC).

 

The governor alleged that the Federal Government is borrowing without a sustainable plan to sort out the debt load.

 

Analysts are concerned that at the level of IGR of the states, non may have the capacity to pay back such loans in the near term.

 

In July 2015, President Muhammadu Buhari approved $2.1billion as an intervention package to help bankrupt states pay salaries and offset contractors’ obligations. Government revenue had dropped at the time because of the fall in the price of oil.

 

However, except for Lagos (78.3%), FCT (57.9%), and Ogun (57.4%), no other sub-national have their IGR equal to or exceed 50 percent of total available revenue in 2020.

 

“Given the expectation that Nigeria’s earnings from crude oil will remain low over the medium term due to the innovation of cleaner energy sources and COVID-19 impact on the global oil market, we expect sub-national’s financial vulnerability to heighten in the near term,” the team of experts from Afrinvest Research stated in their weekly market update.

 

According to the National Bureau of Statistics (NBS), Nigeria’s total public debt portfolio for the States and the Federal Government as of December 31, 2020, stood at N32.92 trillion.

 

The report said that the total States and Federal Capital Territory (FCT) domestic debt was put at N4.19 trillion with Lagos State accounting for 12.15 percent of the debt stock.

 

It added that Jigawa had the least debt stock in this category with a contribution of 0.74 percent.

 

It should be remembered that in April 2020, the Nigerian Governors Forum (NGF) urged the Central Bank of Nigeria to suspend all funds deductions from states and restructure their debt repayments to cushion the impact of Coronavirus on the states’ finances.

 

Developments in the global economy, particularly in the year 2015, grossly affected developing countries. Examples of which include the happenings in the crude oil market, where the Organization of Petroleum Exporting Countries (OPEC) was unable to reach an agreement amongst its member countries, while Non-OPEC producers, such as the US, were not prepared to cut down on production, Iran’s nuclear deal, amongst others.

 

The overall effect has been negative as indicated by the performance of most developing economies, which rely heavily on crude oil. The Nigerian economy is one of such economies affected by these developments. State governments became unable to pay salary and pension arrears alongside huge debts and falling internally generated revenue, hence the call for a bailout

 

 

–Tribune

 

 

 

 

 

 

 

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