Thursday, June 11, 2020 / 10:26 AM / By FBNQuestResearch / Header Image Credit: AllAfrica

Fromour chart today we can see that the growth of the states' domestic debt stockhas started to slow. The increase in 2019 was just N260bn, compared with theprevious year's N500bn. (The stock does not include naira-denominated bondissuance.) The states would have liked to have borrowed more, we assume, buttheir finances are subject to greater supervision by the federal finance ministry,the DMO and the Securities and Exchange Commission. They benefited from sixseparate measures of debt relief in the first term of the Buhariadministration.

The share of Lagos State amounted to 10.8%, representing N440bn. Itsshare of states' external borrowing at end-2019 was 30.6%, representingUS$1.40bn. The most indebted state by some distance in both measures, Lagos isthe best placed to meet its debt obligations by virtue of its successfulharvesting of internally generated revenue (IGR).

In July 2019 Lagos received N11.4bn net from the Federation AccountAllocation Committee (FAAC) after payments of N930m on external debt, N2.0bn ondomestic debt and another N1.0bn deduction from its share of the VAT Pool. Thedata are lifted from the latest report from the office of theaccountant-general of the federation.

Three states received a higher net payout than Lagos. All three (AkwaIbom, Delta and Rivers) are oil producing beneficiaries of the 13% derivationformula.

The states are set to see a sharp decline in their monthly distributionfrom FAAC when we recall the crashing oil price in March and April. (Nigeriancrude is generally sold three months forward.) One state governor has suggestedthat the payout for the three tiers of government in July (from June's revenuein the federation account) may fall short of N200bn. The average over the last12 months has been N693bn.

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