Need For Judicious Use Of Loans

The recent report that 20 state governors in Nigeria have borrowed fresh N446 billion despite a 40 per cent increase in their statutory allocation from the federation account allocation is disconcerting.

This is even as the latest quarterly report from the Nigeria Extractive Industries Transparency Initiative (NEITI) indicated that the Federation Accounts Allocation Committee (FAAC) disbursed N3.473 trillion to the three tiers of government in the second quarter of 2024, reflecting an increase of N46.77 billion or 1.42 per cent compared to the first quarter of 2024.

The data indicated that the federal government received N1.102 trillion, representing 33.35 per cent of the total allocation, the 36 states received N1.337 trillion, or 40.47 per cent of the total monies, and the 774 local government councils shared N864.98 billion, or 26.18 per cent.

In 2023, state governors received the most FAAC allocations in at least seven years, largely due to the current administration’s removal of petrol subsidies and currency reforms.

Nigerians had hoped that with this increased statutory allocation of 40 percent from the central government, state governors would have more than enough to fulfil their statutory obligations and reduce their appetite for more borrowing.

This heavy burden imposed by undesirable borrowing spree underscores a critical issue in fiscal management, as the vast majority of the revenue that states could otherwise allocate to essential public services and development projects is being diverted to meet debt obligations.

Recently, the country’s Debt Management Office (DMO) announced that the nation’s total public debt increased significantly to N121.67 trillion (approximately $91.46 billion) as of March 31, 2024.
This figure encompasses the combined domestic and external debts of the Federal Government of Nigeria (FGN), the thirty-six state governments, and the Federal Capital Territory (FCT).

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In comparison, the total public debt as of December 31, 2023, stood at N97.34 trillion (approximately $108.23 billion), an increase of N24.33 trillion or 24.99 per cent within a three-month period.
Sadly, in our view, these funds, both federation allocation and borrowed, have not improved the livelihoods of Nigerians living across the states, with the level of development still abysmally low, if not negligible.

If anything, the pool of poor Nigerians keeps increasing and widening, based on recent projections by the World Bank that about 40.7 per cent of Nigerians are estimated to live below the international poverty line by the end of 2024.

According to the highlights of the 2022 Multidimensional Poverty Index survey by the National Bureau of Statistics ( NBS), 63 per cent of Nigerians (133 million people) are multidimensionally poor, even though poverty levels across states vary significantly.

The country’s Human Development Index (HDI) has increased 22 per cent in 19 years but remains low at 0.548, which categorises the country as having low human development.

This newspaper acknowledges that most of the Federation Accounts Allocation Committee funds for Osun, Ondo, Kaduna, and Cross Rivers states will be used to service debts this year because these states currently have deficits of N10.94bn, N27.72bn, N15.83bn, and N10.02bn, respectively, following debt servicing deductions by FAAC.

With such a large portion of revenue being used to service debt, it becomes increasingly challenging for states to achieve long-term economic stability and improve the quality of life for their residents.

We also recall that earlier this year, Kaduna State governor Uba Sani, complained about the huge debt burden inherited from previous administrations.

But in our opinion, it’s high time the governors braced up and quit the blame game. All across the states are hallmarks of underdevelopment, ranging from physical infrastructure such as bad roads, dilapidated hospitals and schools, low technology and industrialisation, among others, resulting in prevailing mass poverty, increasing illiteracy and diseases, insecurity, and decreasing life expectancy.

We also recognise that development is not a tea party. If states and the nation are to transform into developed countries, it requires leadership with commitment, zeal, patriotism, consistency, transparency, and accountability.

It is pertinent to note that borrowing, in itself, is not altogether bad. The United States of America is the highest debtor nation in the world. Much depends on how the borrowed funds are applied.

The challenge in Nigeria is that the government, at all levels, believes that loans are largesse to be spent as the borrower pleases. That ought not to be the case. The tragedy of the situation is that not much is on ground to justify these humongous facilities, which, to all intents, are mortgaging the future of the nation.

We are persuaded to make a passionate appeal to governments to adopt a more patriotic approach to finance management in acquiring these facilities and using them to improve the well-being of the citizenry.