FCT, Lagos, Kaduna, Anambra Have Most Sustainable Debt Burden

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FG Eurobond debt

Nigerian States and Federal Debt Stock data as of 31st March 2021 reflected that the country’s total public debt portfolio stood at N33.11 trillion, according to the latest data from the National Bureau of Statistics (NBS).

Further disaggregation of Nigeria’s total public debt showed that N12.47 trillion or 37.67 percent of the debt was external while N20.64 trillion or 62.33 percent of the debt was domestic.

The Federal Government of Nigeria domestic debt stock was put at N16.51 trillion while States and FCT domestic debt stock was put at N4.12 trillion.

Lagos state accounted for 12.31 percent of the total domestic debt stock while Jigawa State has the least debt stock in this category with a contribution of 0.77 percent to the total domestic debt stock.

The total debt stock of N33.11 trillion was equivalent to roughly 22 percent of nominal Gross Domestic Product (GDP) of N152.32 trillion at the end of 2020.

The 22 percent Debt-to-GDP ratio compares favorably to other emerging market economies such as South Africa (77%), Kenya (68.6%), Vietnam (46.6%), United Arab Emirates (38.33%), Brazil (98.94%), Indonesia (36.62%) and Turkey (36.77%).

When the total debt is broken down into component states however it shows some weakness in terms of sustainability especially for states with very low internally generated revenues or IGR, who are often left to the vagaries of oil prices.

IGR to debt ratios

MoneyCentral decided to measure the debt sustainability for individual states by looking solely at the Internally Generated Revenues (IGR) compared to total debt for each state (while completely discounting FAAC allocations) and expressing it as a percentage.

The higher the percentage the more sustainable a State’s debt is.

In other words, the MoneyCentral analysis looked at how a State could afford to pay back its domestic debts using just its internal revenues, which is a scenario likely to begin to play out in the near future as the world moves away from fossil fuels.

Top of the list on the most sustainable State debt burden was FCT Abuja which had a debt to IGR score of 132.3%. The FCT had total debt of just N69.5 billion but an IGR which surpassed it of N92 billion for 2020. This means the FCT could easily liquidate its loans from internal revenues alone with some change to spare.

Next came Lagos with a score of 82.58%. Lagos had total debts of N507.3 billion and IGR of N418.98 billion. Kaduna ranked third with a score of 73.8 percent with debts of N68.754 billion and IGR of N50.76 billion, while Anambra came in fourth place as the state with the most sustainable debt burden with debts of N59.7 billion and IGR of N28 billion for a score of 46.89%.

At the bottom of the table were Taraba which had a score of 8.11 percent from its N100 billion in total debts and N8.114 billion of IGR, Benue with debts of N128.25 billion and IGR of only N10.46 billion, leading to a score of 8.16%, Bayelsa with debts of N142.93 billion and IGR of N12.18 billion for a score of 8.52% and Adamawa which scored 8.74 percent due to total debts of N95.22 billion and IGR of N8.32 billion.

The debt to IGR analysis used by MoneyCentral is useful as can be seen in the case of Taraba and Yobe who have similar levels of IGR but Yobe has a higher score (12.9%) because Taraba is much more indebted.

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