The huge debt burden of the 36 states of the Federation and the Federal Capital Territory (FCT) may not become lighter given the dwindling revenue they are receiving from Federation Account Allocation Committee (FAAC) disbursements, analysts at FBNQuest Research have said. The analysts, who stated this in a report obtained by New Telegraph yesterday, noted that surging crude oil prices had led to the Nigerian National Petroleum Corporation (NNPC) reducing its remittance to the joint FAAC purse by deducting subsidy claims at source in recent times, a development that has hurt most of the states as they rely on FAAC allocations for the bulk of their revenue.
As the analysts put it, “we see from the Debt Management Office (DMO)’s latest quarterly data release that the total domestic debt for the 36 states of Nigeria and the FCT amounted to N4.2 trillion as at September ‘21, representing a modest rise of 1.9 per cent q/q. In aggregate terms, the burden is not light, especially when viewed from the context of state governments’ dwindling revenues from FAAC disbursements in recent months. “In light of rising crude oil prices, the NNPC has lowered its remittance to the joint FAAC purse by deducting subsidy claims at source. Since most states rely on FAAC allocations for the majority of their revenue, this deduction has been a source of concern for them.”
They further noted that National Bureau of Statistics (NBS’) revenue data for FY’20 “highlights the reliance of most states on FAAC disbursements, showing that only four states – Lagos, Ogun, Rivers, Kaduna and the federal capital territory (FCT) generated over 45 per cent of their revenues internally.” Although the analysts noted that DMO data showed that Lagos is the most indebted state, with a total debt balance of N532 billion as at Q3’21, which when the N137 billion bond issued by the state in December ‘21, is included, rises to N670 billion, they stated that unlike most states, the debt burden of Lagos is sustainable.