Checkout Magazine has learnt that in the last two years, the majority of states have drastically reduced their debt exposure.
According to data from the Debt Management Office (DMO), which oversees the government’s debt management, more than three-quarters of the states reduced their loans over the past 15 months.
This has been linked to a rise in their allocation from the consolidated revenue account following petrol subsidy removal by President Bola Ahmed Tinubu. Accruals to the purse have significantly increased.
Federal, states, and local governments, which hitherto shared less than N1 trillion monthly, have been sharing an average of N1.6 trillion.
In June, the highest distributable amount of N1.8 trillion was shared: the Federal Government got N645.383 billion; states (N607.417 billion), and local governments (N444.853 billion).
Additionally, N120.759 billion was distributed to oil-producing states as 13 per cent derivation revenue from mineral sources.
A review of sub-nationals’ domestic debts showed that while some appeared to be avoiding fresh loans, others were reducing debts. A few accumulated more.
In the first quarter of this year, total debts of the states and the FCT stood at about N3.869 trillion.
This represented a decrease of N199.02 billion compared to N4.068 trillion recorded in the first quarter of last year.
It also indicated a drop of N98.92 billion from N3.968 trillion recorded in the fourth quarter of 2024.
A breakdown showed that Delta is atop the chart of 28 states that reduced their debts.
It brought down its debt of N334.77billion in 2024 to N204.60 billion in the first quarter of this year. The reduction represented 38.87 per cent.
Chief Economist, ARKK Economics and Data Limited, Dr. Samson Simon, said: “Those states still piling up debts despite increased FAAC allocation are those that are doing the right things or wrong things.
“Those doing the right things are those who accumulated debts for infrastructure and other capital spending.
“Those doing the wrong things are fiscally irresponsible, and not managing their resources well.
“If the debts accumulated are for noble causes like human capital development in areas of education and healthcare delivery or physical capital, that is good for the economy and the people.
“But, if the debt overhang is because of waste, inefficiency and indiscipline, then it is bad for the people and the economy.”
