The external debt of the 36 state governments and the federal capital territory (FCT) increased by 7.9% y/y to US$4.25bn in June (2018). The debt is all contracted on concessional terms, and indeed all due to multilateral agencies other than borrowings of US$220m by seven states from the agence française de développement (AFD), the French state development bank. The debt is also all guaranteed by the FGN. Predictably, Lagos is comfortably the largest debtor (see chart), and accounts for US$140m of the loans granted by the AFD.
- Monthly payouts by the Federation Account Allocation Committee to the states are made after deductions for debt service and certain other charges related to federal programmes (Good Morning Nigeria, 06 September 2018).
- For the payment from July 2018 revenues, the gross statutory allocation of N5.0bn for Lagos became N2.2bn after charges: for Edo, the second largest external borrower, N4.9bn became N4.6bn. The deductions in the month for external debt service were N850m for Lagos and N70m for Edo.
- While all borrowings are vetted by the FGN, there are variances in debt service capacity. Babatunde Fowler, head of the Federal Inland Revenue Service, noted in May that the internally generated revenue collected by Lagos was the equivalent of that raised by another 31 states combined. Lagos boosted its revenue excluding the statutory allocation by 13.2% in 2017 to N369bn, according to its financial statements printed in the local media last month.
External debt of state governments, Jun 2018 (% shares)
Sources: Debt Management Office (DMO); FBNQuest Capital Research
- Some fiscal assistance is on its way. The federal finance ministry has announced the approval of a payment of US$2.68bn to the states as their final instalment of the Paris Club “refund”. Local media accounts indicate that the payments will be subject to a number of conditions. The states must treat arrears on salaries and other personnel costs as a priority, and must pledge to start repaying their budget support loans granted in 2016.