EKO HOT BLOG reports that the Federation Account Allocation Committee Disbursement reports, the Federal Government has deducted over N415 billion from state government allocations to service their external loans between 2019 and 2023.
This information, published by the National Bureau of Statistics, highlights significant deductions made from state allocations from the Federation Account over the past few years.
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The federation account operates under a legal framework that distributes funds through statutory allocation, Value Added Tax distribution, and the derivation principle. An analysis of the report reveals that deductions incurred by sub-national entities amounted to N57 billion in 2019, N74 billion in 2020, increasing to N86.2 billion in 2021, N78 billion in 2022, and reaching N120.01 billion by December 2023. This substantial increase of 110 percent underscores the country’s substantial debt burden amid declining revenue.
It was observed that the most hit state by the deductions was Lagos, with about N131.1bn deducted for external debt servicing.
It was followed by Kaduna with N45.85bn deducted, and Cross River with N21.59bn deducted.
About N18.25bn, N14.76bn, N10.31bn and N10.92bn were deducted from Oyo, Rivers, Ogun and Edo respectively.
The least affected states were Borno (N1.55bn), Yobe (N2.1bn) and Zamfara (N2.1bn).
The total amount deducted was mostly fixed throughout the year except for January and February.
Despite this heavy debt servicing, the federal government has not restrained from obtaining loans to service its expenditures.
It was reported that the Government borrowed a total sum of N4.94tn from domestic sources in the first six months of the administration of President Bola Tinubu, indicating significant dependence on loans.
It observed that the domestic debts rose by N4.94tn from N48.3tn recorded in June 2023 to N53.3tn as of December 31, 2023. Although external loans reduced by $664m in the six months ($43.2m in June and $42.4m in December), the figure increased by $901m when compared with $41.5m in September and $42.4m in December.
Also, Nigeria spent a sum of N7.8tn to service its debt obligations in 2023, a 121 per cent increase compared to N3.52tn incurred in the previous year.
An analysis of the domestic debts showed that the government borrowed N2.29tn from the FGN bonds market with the figure increasing by 5.45 per cent from N41.97tn recorded in June 2033 to N44.26tn as of December 31, 2023.
The government also borrowed N1.79tn from treasury bills, N8.47bn from savings bonds, N350bn in Sukuk loans, and N549.02bn from promissory notes.
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Under external debt, increased borrowing was observed from the African Development Bank and the Exim Bank of China, with a total loan of $541.5m.
The increased debt is, however, contradictory to promises made by the Tinubu administration to reduce borrowing and focus more on increasing revenues.
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