THE Fiscal Responsibility Commission’s (FRC) report which shows that most states in the country have racked up debts in excess of 50 per cent of their annual revenue, the limit set by the Debt Management Office (DMO), is both bewildering and gnawing. According to the 2016 report, which was recently released, the debt profiles of 18 states exceeded their gross and net revenues by over 200 per cent, while those of Lagos, Osun and Cross River states ranged between 480 and 670 per cent of their gross revenue. The report added that only six states complied with the debt-to-revenue ratio. The agency, while stressing that the debt to net revenue ratio of many of the states had placed them in precarious situations, submitted that “There is a need for each of these states to work towards bringing their respective consolidated debts within the 50 per cent threshold of their total revenue in order to guarantee a general public debt sustainability in the country.”
We cannot concur less with the FRC’s submission that the debt situation of the states needs to be urgently addressed. But beyond that, it is our considered opinion that the development has sprouted some questions that must be answered forthwith. Since the DMO’s guidelines clearly state that the debt-to-income ratio of a state should not surpass 50 per cent of its statutory revenue for the preceding 12 months, how were these states able to access borrowings in flagrant disregard of the nation’s extant rules? Which officers approved the borrowings? Which financial institutions, knowing the position of the country’s laws, granted the credit facilities to the states?
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Indeed, what interventions did the DMO make to stop this illegality? What role did the state Houses of Assembly play in checking this affront to the country’s rules and regulations? What did the financial regulatory agencies do to stop the misdemeanor? Now, if sub-national governments and state institutions intentionally and deliberately contravene the laws regulating their activities, what hope is there for the country? If a state takes loans in excess of 50 per cent revenue, it will find it extremely difficult to discharge its responsibilities to the citizenry because a huge chunk of its future revenue will have to be earmarked for debt repayments. According to the International Monetary Fund (IMF), Nigeria currently expends 66 per cent of its tax revenue on debt repayment. Not only does this vitiate investment in human capital development, it will also impair investment in infrastructure development. The result is a long romance with underdevelopment, poverty, squalor and poor education.
As frightening as that is, things are even worse considering the fact that much of the facilities taken by the states seem to have been gobbled by gnomes. The states are bereft of any proof that such loans were ever accessed. Many of the states are in no way better than they were before the loans were taken. Not much has changed in those states to warrant the huge debts overhang. Which projects have been financed by the states with the humongous debts? Which structures can the states point at as the justification for giving away a chunk of the future through debt accumulation? Where are the factories built with the borrowed money? Where are the farmlands cultivated with the loans? Where are the new jobs created? Where are the hospitals built? Where are the schools? Where are the new roads? Where has all the money gone? What did the debt-loving governors do with the loans they took?
If the loans had been judiciously utilised, they would have provided some comfort for the citizens who will have to sweat out the repayments, but the pains of the debts have become more excruciating and heartrending in the face of the apparent squandering of the loans. The regulatory authorities that ought to have stopped the states from exceeding the boundary but failed to do so are as culpable as the states. To avert state governments crippling their states through debt accumulation, regulatory agencies and institutions must be alive to their responsibilities. They must stop state executives from taking credit facilities that will create poverty and insolvency. That is the essence of the checks and balances entrenched in the constitution.