Lagos

A report has shown that Lagos, Osun and Cross River states have the highest debt to revenue ratio of the 36 states of the federation.

This was disclosed in the annual report prepared by the Fiscal Responsibility Commission.

The three states debt profile is 480 percent more than their revenue; a far cry from the 50 percent ratio advised by the Debt Management Office (DMO).

Though the highest, the three states are joined by other states with 18 of them having as much as 200 percent.

The report stated, “In the light of the DMO’s guidelines on the Debt Management Framework, specifically, sections 222 to 273 of the Investment and Securities Act, 2007 pertaining to debt sustainability, according to the guidelines, the debt to income ratio of states should not exceed 50 percent of the statutory revenue for the preceding 12 months.”

The states with the highest debt to gross revenue ratios were Lagos (670.42 percent), Osun (539.25 percent), Cross River (486.49 percent), Plateau (342.01 percent), Oyo (339.56 percent), Ekiti (339.34 percent), Ogun (329.47 percent), Kaduna (297.26 percent) and Imo (292.82 percent).

The report, employing each state’s debt status as at December 31, 2016, stated that it should not be concluded that a state had over-borrowed because its debt to revenue ratio is more than 50 percent. It, however, is an indicator as to the ability of the states to service any debt incurred.

The report stated, “It should be noted that the fact that some states exceeded the threshold of 50 percent of their total revenue is not an indication that they over-borrowed as the debt limits of the governments in the federation are yet to be set.

“Furthermore, only total revenue is used for the foregoing analysis as comprehensive data on the states’ Internally Generated Revenue were not available. In any case, the IGR on the average is not more than eight percent of the states’ total revenue except for Lagos State. In essence, the non-inclusion of the IGR may not distort the result of the analysis.

“Therefore, there is a need for each of these states to work towards bringing their respective consolidated debts within the 50 percent threshold of their total revenue in order to guarantee a general public debt sustainability in the country.”

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