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Debts Exceed Statutory Revenues in 32 States, Says FRC



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  • 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.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

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Remittances To Africa Projected to Drop By 5.4% in 2021: UNECA



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According to a new report from United Nations Economic Commission for Africa (UNECA), remittances to Africa are projected to drop by 5.4 percent to $41 billion in 2021 from $44 billion last year.

The report notes that the bleak situation has been compounded by the high cost of sending money to Africa from abroad, as the cost of remittances to Africa remains the highest in the world at 8.9 percent.

Remittances are an essential part of economic activity in low and middle-income countries (LMIC), including Africa. Due to the economic crisis induced by the COVID-19 pandemic and shutdown, global remittances are projected to decline sharply by about 20 percent in 2020. For Africa, remittances are projected to drop by 5.4 percent to $41 billion in 2021 from $44 billion last year, according to a new report by the United Nations Economic Commission for Africa (UNECA) projects remittances.

The report, titled “African regional review of the implementation of the Global Compact for Safe, Orderly and Regular Migration”, notes that the projected fall is mainly due to a fall in the wages and employment of migrant workers, who tend to be more vulnerable to loss of employment and wages amid the pandemic.

The report adds that the bleak situation has been compounded by the high cost of sending money to Africa from abroad as the cost of remittances to Africa remains the highest in the world at 8.9 percent.

“A migrant sending $200 to his/her family in Africa pays an estimated nine percent of the value of the transaction, indicating that the continent is still far from achieving the three percent target set out in Sustainable Development Goal 10,” the report stated.

This signals huge deficits in millions of African households depending on their friends and relatives abroad for a financial lifeline, thus threatening a perpetuation of macroeconomic imbalances on the continent.

The Addis Ababa Action Agenda of the Third International Conference on Financing for Development and Sustainable Development Goal indicator 10(c) provides that countries should, by 2030, reduce to less than three percent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than five percent.

In response, some African countries have taken action to lower the costs of remittance transfers by offering diaspora bonds to investors and relaxing foreign exchange controls to allow for electronic and mobile money transfers at reduced costs.

“It should be noted, in that regard, that the use of digital money transfer platforms reduces transfer fees in Africa by an average of 7 percent,” says the report.

“Private financial institutions also offer incentives to encourage members of diaspora communities to use their services, including low transaction fees for remittances, and facilitate diaspora-initiated projects, especially in the real estate sector. These measures all promote the financial inclusion of migrants and their families.”

The report recommends that member States support migrants and their families through adopting laws and regulations to facilitate the sending and receiving of remittances, including by fostering competition among banks and other remittance handling agencies to establish low-cost transfer mechanisms.

In addition, the report recommends that African countries make every effort to reduce the transfer costs associated with remittance payments by making more extensive use of digital transfer solutions, such as MPESA, and by streamlining the regulatory constraints associated with international money transfers.

Finally, the report concludes that the African States should also engage with destination countries to identify ways to enhance the provision of basic services to migrants in those countries as remittances are a primary source of national income for at least 25 African countries, all of which have large diaspora populations.

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Nigeria’s Inflation Rate Declines to 17.01 Percent in August 2021



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Prices moderated further in Africa’s largest economy, Nigeria, in the month of August despite rising costs and growing economic uncertainties.

Consumer Price Index (CPI), which measures inflation rate, grew by 17.01 percent year-on-year in August 2021, representing a 0.37 percent decrease when compared to the 17.38 percent recorded in the month of July 2021.

On a monthly basis, inflation rate increased by 1.02 percent in August 2021, slightly higher by 0.09 percent than the 0.93 percent filed in July, the National Buruea of Statistics (NBS) stated in its latest report.

Prices of goods and services continued to drop on paper in recent months even as costs are hitting record highs across most sectors in Nigeria.

Naira has plunged to a record-low against the United States Dollar and other global currencies following the Central Bank of Nigeria’s decision to halt sale of forex to Bureau De Change Operators in an effort to curb illicit financial flows and forex supplies to the black market.

Naira plunged to N560 per United States Dollar at the black on Wednesday to set a new record low against the greenback and subsequently dragged on cost of import goods and profit of import dependent businesses.

Food Index also rose at a slower pace in August 2021 even with Nigerians complaining of over 50 percent increase in the price of food items. Food composite index rose by 20.30 percent in August, at a slower pace when compared to 21.03 percent recorded in the month of July 2021.

The rise in food index were caused by increases in prices of Bread and cereals, Milk, cheese and egg, Oils and fats, Potatoes, yam and other tuber, Food product n.e.c, Meat and Coffee, tea and cocoa, according to the NBS report.

On a monthly basis, the food sub-index grew by 1.06 percent in August 2021, representing an increase of 0.20 percent from 0.86 percent filed in the month of July 2021.

Looking at a more stable food index guage, the twelve-month period ending August 2021 over the previous twelve-month average, food index increased by 0.34 percent from 20.16 percent achieved in July 2021 to 20.50 percent in August 2021.

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Glo to Reconstruct 64km Ota-Idiroko Road Using Tax Credit Scheme – Fashola



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Mobile telecommunications giant, Globacom, has offered to reconstruct the 64 km Ota-Idiroko road in 2022, using Federal Government’s Tax Credit Scheme.

The Minister of Works and Housing, Mr. Babatunde Fashola, announced this on Wednesday during an inspection tour of the ongoing reconstruction of the Lagos-Ibadan Expressway.

“From Ota to Idiroko, we don’t have a contract there, but Chief Mike Adenuga of Globacom has offered to construct that road using the tax credit system.

“So, that has also started, they are doing the design, and hopefully, by sometime early next year, they should mobilize to site. The real reconstruction is going to happen if we have a deal with Glo,” Fashola said.

He said that FERMA would carry out rehabilitation works on the Ota-Idiroko road between October and December.

“But between now and December, FERMA has gone to take measurements there and they will move there from the end of September if the Ogun State Government does two things.

“Clear all the squatters, traders, and the settlers on the road and help us manage traffic and the governor as at last night has committed to doing that for us,” the minister said.

He said efforts were on to bring in Flour Mills of Nigeria Plc and Unilever to reconstruct the Badagry link to the Lagos-Ota-Abeokuta road under the Tax Credit Scheme of the Federal Government.

The minister said that the Lagos-Ota-Abeokuta road had become a problematic road due to years of neglect by previous administrations, as such the highway required a huge investment.

He commended Gov. Dapo Abiodun for his passion for fixing roads in Ogun State, adding that the reconstruction of the failed portions of the Lagos-Ota-Abeokuta road would be completed by December at the cost of N13. 4 billion.

The minister added that the project would be handled by the Federal Road Maintenance Agency (FERMA).

He called on federal lawmakers representing Lagos and Ogun States to ensure increased budgetary allocation for the roads to ensure their speedy completion to ease the hardship on road users.

“When people say Fashola is looking away, I am not looking away, I just can’t find the money,” he said.

He also called for support of citizens for parliamentarians to ensure more borrowing for infrastructure upgrades because the future depends on development strides today.

Also speaking during the inspection tour, Gov. Dapo Abiodun of Ogun said that the project became necessary because Ogun is the industrial hub of the nation that needed good roads for interconnectivity to boost commerce.

He said: “We have given the commitment that we will relocate traders, we will control and manage traffic, whatever that it is we need to do, we will ensure that we begin to bring succor and needed relief to our people.

“The state of that road today is pitiable. I went on that road myself and I felt bad for our citizens.”

Abiodun said the state government was ready to borrow to reconstruct the Lagos-Ota-Abeokuta Road should there be a delay in the Sukuk funding for the highway.

“If this Sukuk bond would not happen immediately, the state government is willing to go and borrow against that promise so that we can mobilize the contractor,” he said.

He thanked Fashola for the efforts to reconstruct roads in the state and pledged the support of the state government in fixing the highways.

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