Approaching N1 trillion, should we be worried about Lagos State’s rising debt?
Data from the National Bureau of Statistics reveals Lagos State is by far the most indebted state in Nigeria. The state owes about $1.3 billion and another N311 billion in Naira denominated debts.
The report contains the breakdown of both external and local debts owed by the 36 states and Federal Capital Territory (FCT) as at the end of 2016.
According to the data, total external debts owed by states amount to about $3.5 billion while domestic debt was about N2.9 trillion only.
At N311 billion and $1.3 billion in external debts, Lagos State debts is estimated at about N815 billion or N0.8 trillion.
Detailed Breakdown of external debt by states
The detailed breakdown shows that Lagos topped the list with $1.380 billion, which represented about 38.7% of the total sub-national external debt.
Detailed breakdown of the N2.95 trillion domestic debt
On the domestic debt, the states owed N2.95 trillion as at the end of September last year, with Lagos States also the most indebted. Its domestic debt stood at N311.7 billion as at the period under review.
It was followed by Delta State with N237.797 billion, and the Federal Capital Territory with N52.8 billion.
Should Lagosians be worried
Lagos State currently has an internally generated revenue of about N302 billion which suggest its local debt as a percentage of internally generated revenue is over a 100%. Add foreign debts and we are looking at over 2: 1.
However, it budgeted about N24 billion as external debt servicing for the year 2017. This represents about 8% of total revenue. Based on this, Lagosians need not worry as the State trailing internally generated revenue (IGR) is about 12.5x its debt obligation for the year. On the foreign front, Lagos State has an obligation to pay about N6 billion this year, which is about 2% its IGR.
Lagos State also earmarked another N71.5billion in total debt repayments for the year 2017. Add that to the combined debt service of about N30 billion then Lagos State will have a total debt obligation of about N100 billion this year alone. Again, that is less than one-third its internally generated revenue. Add its share of FG allocation and maybe you will agree the state is more comfortable than its “peers”.
The data above therefore suggest Lagos State’s debt situation is for now not a worry as it can generate enough revenue to meet its obligations. In fact, Lagos State claims it plans to borrow another N170 billion in 2017 to finance its budget deficits. It’s total expenditure for 2017 is about N812 billion about 12% the Federal Budgeted expenditure.
Lagos States total debt is projected to cross N1 trillion by the time Ambode is up for re-election. We believe by then, opponents of the governor will have significant ammunition to dent his polices particularly if Lagosians do not see much in state if the economy.