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Most states have overshot borrowing limit—Report

A report of Fiscal Responsibility Commission, FRC, for 2016 has indicated that most states in the country have overshot the threshold in borrowing.

It also noted that of the six states in the South-West,  five were among the top seven states with worrisome debt to revenue ratio.

According to the report, Lagos, Osun and Cross River states have debts over 480 per cent of their gross revenues, while those of 18 states exceed their revenues by more than 200 per cent.

The report revealed that the trend was contrary to the guidelines set by Debt Management Office on debt sustainability, which states that the debt of a state should not exceed 50 per cent of the state’s statutory revenue in the previous 12 months.

“In the light of the DMO’s guidelines on the Debt Management Framework, specifically, sections 222 to 273 of the Investment and Securities Act, 2007 pertaining to debt sustainability, according to the guidelines, the debt to income ratio of states should not exceed 50 per cent of the statutory revenue for the preceding 12 months,” the report said.

It said many states, however, flouted the DMO’s directive, with their debt status exceeding the debt to revenue ratio by more than 100 per cent.

An analysis of the debt profiles of the states as at December 31, 2016, showed that states in the South-west top the list of states with worrisome debt to revenue ratio.


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