By Dapo Akinrefon, with Agency report
Abuja—THE Fiscal Responsibility Commission, FRC, has disclosed that South West states, at the end of 2016, owed debts well in excess of 50 per cent of their annual revenues.
The report stated that five of the six states in the South West are 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 revelations are contained in the 2016 annual report of the FRC obtained by the Abuja-based Economic Confidential on Monday.
The report said: “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.”
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, shows that South West states top the list of states with worrisome debt to revenue ratio.
Lagos, Osun, and Oyo made the top five, followed by Ekiti and Ogun states in sixth and seventh positions respectively.
The report showed that states with the highest debt to gross revenue ratios were Lagos (670.42 per cent), Osun (539.25 per cent), Cross River (486.49 per cent), Plateau (342.01 per cent) and Oyo (339.56 per cent).
Others are Ekiti (339.34 per cent), Ogun (329.47 per cent), Kaduna (297.26 per cent), Imo (292.82 per cent), Edo (270.8 per cent), Adamawa (261.96 per cent), Delta (259.63 per cent), Bauchi (250.75 per cent), Nasarawa (250.36 per cent), Kogi (221.92 per cent), Enugu (207.49 per cent), Zamfara (204.91 per cent), and Kano (202.61 per cent).
The debt to net revenue ratio of Lagos and Cross River puts the states in even more precarious situations.
Analysis shows that the debt to net revenue ratio of Lagos, for instance, is 930.96 per cent, while that of Cross River is 940.64 per cent.
However, states whose debts did not exceed the 50 per cent ratio by more than 100 per cent are Anambra, Borno, Jigawa, Kebbi, Sokoto, Yobe and the Federal Capital Territory.
Osun govt reacts
Reacting, Mr Sola Fasure, the Media Adviser to Governor Rauf Aregbesola, said: “The debt to revenue ratio is completely meaningless. Your debt profile should be compared to your total worth, not your income.
“Secondly, the loan you took should be examined in light of what you want to do with it. Let’s say you want to take a mortgage to build a house and your income is N50,000 in a month, does it mean you will ask for N100,00? You will ask for at least Ñ1m, which is barely enough to build a two bedroom apartment and which is 2000 per cent of your income.
“Thirdly, these loans were used for human and infrastructure development and are therefore investment for the future.”