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Debts Exceed Statutory Revenues in 32 States, Says FRC



Internal revenue
  • Debts Exceed Statutory Revenues in 32 States, Says FRC

The consolidated debts of 32 states of the federation exceeded their gross statutory revenues in 2017, a report of the Fiscal Responsibility Commission has shown.

As of December 2017, the 36 states of the federation had total public debts of N4,495,027,062,300.37 while they had gross statutory revenues totalling N2,098,615,470,240.44 and net revenues totalling N1,739,290,877,423.07.

This means that collectively, the debts of the 36 state governments exceeded their statutory revenues for the whole year by N2, 396,411,592,060 or by 53.31 per cent.

It also means that the states spent a total of N359, 324,592,817.3 or 17.12 per cent of their statutory revenues to service their debts within the one year period.

According to analyses presented by FRC, all the states of the federation except Anambra, Katsina, Sokoto and Yobe had debts to statutory revenues exceeding 100 per cent.

The report obtained by our correspondent in Abuja on Wednesday showed that of all the states of the federation, Osun State had the highest debt burden going by its debt-to-gross revenue ratio.

The report revealed that Osun had a debt to gross revenue ratio of 425.6 per cent. The situation became more precarious as the state enjoyed a debt-to-net revenue ratio of 1,607.79 per cent.

Debt to net revenue ratio measures how much the state is left with after debt servicing charges are deducted from the statutory revenue of a state.

The statutory revenue is what a state gets from the federation account on a monthly basis. It constitutes the bulk of a state’s income on a monthly basis as most states are known to make only marginal revenues from Internally Generated Revenue sources.

Osun had a total public debt of N167, 801,453,519.46. Its gross statutory revenue amounted to N39, 427,491,639.62 while it had net statutory revenue of N10, 436,789.071.78.

Lagos had a public debt of N811, 938,493,497.41; gross statutory revenue of N123, 421,828,999.27 and net revenue of N89,694,754,919.47 while Cross River had a public debt of N177,032,983,556.52; a gross statutory revenue of N41,963,126,084.71 and a net statutory revenue of N23,451,782,733.

Ekiti had a total public debt of N141,380,068,783.48, gross statutory revenue of N37,754,966,137.46 and net statutory revenue of N25,633,665,721.06 while Ogun had a public debt of N139,409,946,526.63, gross statutory revenue of N40,708,133,204.84 and a net statutory revenue of N26,185,030,796.11.

The report said, “Osun State recorded the highest debt-to-net statutory revenue with 1,607.79 per cent. The main reason for this high debt-to-net statutory revenue percentage can be explained by the deduction of N28,990,702,567.84 at source from its Gross Statutory Revenue of N39,427,491,639.62.

“This can be translated to mean that out of every N100 due to Osun State as Gross Domestic Revenue, only about N27 actually went to the coffers of the state government, thereby accounting for the abnormally high 1,607.79 Debt-to-Net Statutory Revenue.

“Lagos State has the next highest Debt-to-Net Statutory Revenue of 905.22 per cent followed by Cross River State with 754.88 per cent. Ekiti State accounted for the fourth highest Debt-to-Net Statutory Revenue percentage of 551.54 per cent while Ogun, Plateau and Oyo states followed with 532.4 per cent, 444.13 per cent and 354.68 per cent respectively.

“On the other hand, Anambra State had the least Debt-to-Net Statutory Revenue of 69.32 per cent followed by Yobe with 89.93 per cent. Sokoto, Jigawa and Katsina states followed with 93.65 per cent, 96.15 per cent and 111.96 per cent respectively.”

With a total public debt of N28, 905,189,191.27, Anambra had gross statutory revenue of N43, 089,159,428.87. This translates to debt to gross statutory revenue of 67.08 per cent. With net revenue of N41, 338,238,321.08, the state had a debt to net revenue of 69.92 per cent.

Regarding the debt sustainability of the states, the Fiscal Responsibility Commission said that since the Gross Domestic Product of each state had not been figured out, the debt sustainability could not be determined.

Nonetheless, it added that the level of borrowing by the states could be gauged by the regulation of the Debt Management Office that the debt status of each state at any particular time should not exceed 50 per cent of its statutory revenue in the preceding 12 months.

If this rule is applied, even Anambra State with the least debt to revenue ratio of 67.08 per cent can be said to have over-borrowed having exceeded the limit by 17.08 per cent.

The Fiscal Responsibility Commission said that states whose proportions of debt-to-revenue exceeded 50 per cent were assumed to have violated Section F (C) of DMO 2012 Debt Management Guidelines.

However, it added, it would be legally wrong to conclude that such states had over-borrowed as the overall debt limits for the governments had not been set.

Our correspondent reports that the Fiscal Responsibility Act vests on the President the power to set the borrowing limit for subnational governments in the country. No such limit has been set.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq,, Investorplace, and many more. He has over two decades of experience in global financial markets.

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South Africa’s Inflation Rate Holds Steady in May



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South Africa’s inflation rate remained unchanged in May, increasing the likelihood that the central bank will maintain current borrowing costs.

According to a statement released by Statistics South Africa on Wednesday, consumer prices rose by 5.2% year-on-year, the same rate as in April.

The consistent inflation rate is expected to influence the decision of the six-member monetary policy committee (MPC), which is set to meet in mid-July. The current benchmark rate stands at 8.25%, a 15-year high, and has been held steady for six consecutive meetings.

Central Bank Governor Lesetja Kganyago has repeatedly emphasized the need for inflation to fall firmly within the 3% to 6% target range before considering any reduction in borrowing costs.

“We will continue to deliver on our mandate, irrespective of how our post-election politics plays out,” Kganyago stated earlier this month in Soweto. “The only impact is what kind of policies any coalition will propose. If the policies are not sustainable, we might not have investment.”

While money markets are assigning a slim chance of a 25-basis point rate cut in July, they are fully pricing in a reduction by November.

Bloomberg Africa economist Yvonne Mhango anticipates the rate-cutting cycle to begin in the fourth quarter, supported by a sharp drop in gasoline prices in June and a rally in the rand.

The rand has appreciated more than 3% since Friday, following the ANC’s agreement to a power-sharing deal with business-friendly opposition parties and the re-election of President Cyril Ramaphosa.

In May, the annual inflation rates for four of the twelve product groups remained stable, including food and non-alcoholic beverages.

However, transport, alcoholic beverages and tobacco, and recreation and culture saw higher rates. Food prices increased by 4.3% in May, slightly down from 4.4% in April, while transport costs rose by 6.3%, up from 5.7% and marking the highest rate for this category since October 2023.

The central bank’s cautious stance on monetary policy reflects its ongoing concerns about inflation.

Governor Kganyago has consistently voiced worries that the inflation rate is not decreasing as quickly as desired. The MPC’s upcoming decision will hinge on sustained inflationary pressures and the need to balance economic stability with fostering growth.

As South Africa navigates its economic challenges, the steady inflation rate in May provides a measure of predictability for policymakers and investors alike.

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Ghana Reports Strong 4.7% GDP Growth in First Quarter of 2024



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Ghana’s economy showed impressive growth in the first quarter of 2024 with the Gross Domestic Product (GDP) expanding by 4.7% compared to the same period last year, according to Government Statistician Samuel Kobina Annim.

This represents an increase from the 3.8% growth recorded in the previous quarter and should provide a much-needed boost to the ruling New Patriotic Party (NPP) as the nation approaches the presidential elections scheduled for December 7.

The positive economic data comes amidst a challenging backdrop of fiscal consolidation efforts under a $3 billion International Monetary Fund (IMF) rescue program.

The government has been working to control debt through reduced spending and restructuring nearly all of its $44 billion debt.

This includes ongoing negotiations with private creditors to reorganize $13 billion worth of bonds.

The latest GDP figures are seen as a vindication of the NPP’s economic policies, which have been under fire from the main opposition party, the National Democratic Congress (NDC).

The opposition has criticized the government’s handling of the economy, particularly its fiscal policies and the terms of the IMF program, arguing that they have imposed undue hardship on ordinary Ghanaians.

However, the 4.7% growth rate suggests that the measures taken to stabilize the economy are beginning to yield positive results.

Analysts believe that the stronger-than-expected economic performance will bolster the NPP’s position as the country gears up for the presidential elections.

“The growth we are seeing is a testament to the resilience of the Ghanaian economy and the effectiveness of the government’s policies,” Annim stated at a press briefing in Accra. “Despite the constraints imposed by the debt restructuring and IMF program, we are seeing significant progress.”

The IMF program, which is designed to restore macroeconomic stability, has necessitated tough fiscal adjustments.

These include cutting government expenditure and implementing structural reforms aimed at boosting economic efficiency and growth.

The government’s commitment to these reforms has been crucial in securing the confidence of international lenders and investors.

In addition to the IMF support, the government has also been focused on diversifying the economy, reducing its reliance on commodities, and fostering sectors such as manufacturing, services, and technology.

These efforts have contributed to the robust growth figures reported for the first quarter.

Economic growth in Ghana has been uneven in recent years, with periods of rapid expansion often followed by slowdowns.

The current administration has emphasized sustainable and inclusive growth, seeking to ensure that the benefits of economic progress are widely shared across all segments of the population.

The next few months will be critical as the government continues its efforts to stabilize the economy while preparing for the upcoming elections.

The positive GDP growth figures provide a strong foundation, but challenges remain, including managing inflation, creating jobs, and ensuring the stability of the financial sector.

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World Bank Commits Over $15 Billion to Support Nigeria’s Economic Reforms



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The World Bank has pledged over $15 billion in technical advisory and financial support to help the country achieve sustainable economic prosperity.

This commitment, announced in a feature article titled “Turning The Corner: Nigeria’s Ongoing Path of Economic Reforms,” underscores the international lender’s confidence in Nigeria’s recent bold reforms aimed at stabilizing and growing its economy.

The World Bank’s support will be channeled into key sectors such as reliable power and clean energy, girls’ education and women’s economic empowerment, climate adaptation and resilience, water and sanitation, and governance reforms.

The bank lauded Nigeria’s government for its courageous steps in implementing much-needed reforms, highlighting the unification of multiple official exchange rates, which has led to a market-determined official rate, and the phasing out of the costly gasoline subsidy.

“These reforms are crucial for Nigeria’s long-term economic health,” the World Bank stated. “The supply of foreign exchange has improved, benefiting businesses and consumers, while the gap between official and parallel market exchange rates has narrowed, enhancing transparency and curbing corrupt practices.”

The removal of the gasoline subsidy, which had cost the country over 8.6 trillion naira (US$22.2 billion) from 2019 to 2022, was particularly noted for its potential to redirect fiscal resources toward more impactful public investments.

The World Bank pointed out that the subsidy primarily benefited wealthier consumers and fostered black market activities, rather than aiding the poor.

The bank’s article emphasized that Nigeria is at a turning point, with macro-fiscal reforms expected to channel more resources into sectors critical for improving citizens’ lives.

The World Bank’s support is designed to sustain these reforms and expand social protection for the poor and vulnerable, aiming to put the economy back on a sustainable growth path.

In addition to this substantial support, the World Bank recently approved a $2.25 billion loan to Nigeria at a one percent interest rate to finance further fiscal reforms.

This includes $1.5 billion for the Nigeria Reforms for Economic Stabilization to Enable Transformation (RESET) Development Policy Financing, and $750 million for the NG Accelerating Resource Mobilization Reforms Programme-for-Results (ARMOR).

“The future can be bright, and Nigeria can rise and serve as an example for the region on how macro-fiscal and governance reforms, along with continued investments in public goods, can accelerate growth and improve the lives of its citizens,” the World Bank concluded.

With this robust backing from the World Bank, Nigeria is well-positioned to tackle its economic challenges and embark on a path to sustained prosperity and development.

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