Successive administrations ignored a key provision of the Fiscal Responsibility Act which mandated the President to set consolidated debt limits for the three tiers of government, checks byA report by
the Fiscal Responsibility Commission said non-compliance with the provision had resulted in the abuse of the procedure for the demand and procurement of loans by the federal and state governments.
The FRC, in its 2018 Annual Report, disclosed that efforts to ensure that a limit was set on the consolidated debt of the three tiers of government, for a more sustainable management of public debt, have not been successful. Section 41 of FRA, 2007, specified that borrowings by the governments in the federation should be for capital expenditure and human development.
The Federal Government and the 36 states, as well as the Federal Capital Territory, owed a total of N27.4tn as at December 2019, according to latest figures released by the Debt Management Office. Currently, Nigeria is grappling with a very high cost of debt service, a development which resulted from the country’s low revenue generation capacity.
The state governments’ preference for commercial bank loans, which come with higher debt service costs, was identified as one of the reasons for the rise in the amount spent in servicing domestic debt. In response to our correspondent’s enquiries, Mr Yunusa Abdullahi, Special Adviser, Media, to the Finance Minister, said “No comment please.”
Our correspondent learnt that the absence of GDP for states was a major constraint in the computation, as Nigeria currently only has a national GDP – a situation which has made it difficult to determine the debt sustainability of state governments on the basis of the proportion of debt-to-GDP. He said, “On the issue of Nigeria’s rising debt profile, it would be helpful to note that this is driven mainly by the huge financing needs of the government.
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