The nine oil-producing states in Nigeria received a whopping sum of N544.9 billion as part of the 13% oil derivatives share from the federal government in the first half of 2023, a 44.2% increase compared to N377.9 billion received in the corresponding period of 2022.
Despite the surge in the allocation, the states saw their debt profile jump by N465.4 billion in the first six months of the year, indicating a rising debt profile amidst a tight fiscal environment.
This is according to an analysis by Nairalytics, the research arm of Nairametrics.
Although the N588.93 billion received in the review period is 8% lower than the N592.3 billion recorded in the second half of last year, the allocations in recent times have surged significantly following the rise in international crude oil prices.
The allocation in the first six months of 2023 already surpassed the entire amount shared in 2021 (N448.7 billion) and 2020 (N424 billion). The nine states are Abia, Akwa Ibom, Anambra, Bayelsa, Delta, Edo, Imo, Ondo, and Rivers.
Delta State gets a giant share
Delta State received the highest share in the first half of 2023 with N180.05 billion, accounting for 33% of the entire amount shared by the nine states.
The allocations received by the state in H1 2023 increased by 56.9% when compared to the N114.7 billion recorded in the corresponding period of 2022.
- In second was Akwa Ibom with N130.8 billion, representing 24% of the total amount shared. The state’s 13% share increased by 63.5% compared to the N80.17 billion received in the corresponding period of 2022 but reduced by 8.2% in contrast to the second half of 2022.
- Bayelsa State received a sum of N92.96 billion in the review period, 21.1% above the N76.7 billion received in H1 2022 but 16.5% lower than the N92.96 billion that was allocated to the state in the second half of 2022.
- Others include Rivers (N92.74 billion), Edo (N17.5 billion), Ondo (N16.9 billion), Anambra (N5.4 billion), and Abia with N2.4 billion.
Massive debt profile despite oil money
Despite the huge allocations to the oil-producing states, they represented some of the highly indebted states in the federation. Notably, the nine states accounted for 25.4% of the debt profile of the entire 36 states including the Federal Capital Territory (FCT), which is estimated at N9.17 trillion.
- Data from the Debt Management Office (DMO) showed that the nine states saw their total debt stock increase from N1.86 trillion recorded as of December 2022 to N2.33 trillion as of the end of June 2023, largely due to the revaluation of their external debt as well as the acquisition of new loans.
- According to the breakdown of the data, the total external debt for the nine states as of June 2023 stood at $861.8 million, indicating a local value of N662.9 billion, using an exchange rate of N769.25/$1.
- On the other hand, domestic debts stood at N1.66 trillion as of the review period, increasing by N196.3 billion from N1.47 trillion recorded as of December 2022. This sums up to a debt profile of N2.33 trillion, and a N465.4 billion increase from an initial debt stock of N1.86 trillion (as of December 2022).
Bottom line
While the increase in the allocation of funds to the oil-producing states is a positive development, as it will significantly assist in fulfilling their financial responsibilities, and a possibility of a further increase due to improved fiscal numbers following the removal of petrol subsidy and the sustained bullishness of crude oil prices.
However, it is worth noting that several of these oil-producing states rank among the nation’s most indebted states despite the additional inflows from the federal government, encouraging complacency on the part of the state governments.
The continuous reliance on federal allocations could potentially discourage states from enhancing their internal revenue-generating capacity, making them highly dependent on federal government allocations.
