Committee expresses worry that states borrow indiscriminately.
The Director General of the Debt Management Office, DMO, Abraham Nwankwo, on Monday said Nigeria’s external debt now stands at $9.16 billion (N1.5 trillion) with the states approximately owing $2.8 billion (N448 billion).
He also said the states account for 18 per cent of domestic debts while the federal government accounts for 82 per cent.
In a memorandum he presented before the National Conference Committee on Public Finance, Mr. Nwankwo said there was nothing wrong with nation states owing, adding that borrowing and debt management were part of modern economy.
He stated that countries like Germany and United Kingdom had strong and frugal economy, but still engaged in borrowing.
The DG said the law guiding borrowing stipulates that no state can borrow except with the express permission of the National Assembly; and any state that does not conform to the stipulation would be seen as committing an illegality.
He added that states also require the approval of the Finance Minister to borrow from the capital market and must also get the approval of their respective Houses of Assembly.
He explained that it was the responsibility of Security Exchange Commission, SEC, to ensure that the money borrowed from the capital market by the States was judiciously utilised.
Mr. Nwankwo told the Committee chaired by a former governor of Kebbi State, Adamu Aliero, that in 2007, the DMO took a decision to help states establish debt management departments to reconstruct their debt profile, particularly domestic debt which he put at N8.7 trillion, excluding debts owed local contractors.
According to him, contractor’s debt was not included because it was a structured debt and usually provided for in the budget.
When asked by Mr. Aliero why state governments borrow indiscriminately from foreign sources without due process, Mr. Nwankwo said relevant agencies of government saddled with the responsibility of tackling states that violate the laws regarding debt management and borrowing should take appropriate action.
A member of the Committee, Bala Mande, expressed worries over the tripling of the nation’s debt and asked to know the relationships between the DG DMO and other relevant agencies like Economic and Financial Crimes Commission, EFCC, and the Independent Corrupt Practices and Other Related Offences Commission, ICPC.
When another member, Dipreye Alamieyeseigha, a former Governor of Bayelsa State, sought his view on how effective the control mechanisms are, Mr. Nwankwo explained that the DMO works with state governments, but does not have relationship with the anti-graft agencies since it (DMO) was not a law enforcement agency
Tunde Lawal, a Director of Micro Economic Analysis, who represented the Minister of National Planning, Shehu Yuguda, in his presentation, said deficit financing was inevitable for a developing nation like Nigeria.
He listed the major sources of Public Finance to include Federation Account, Value Added Tax and oil revenue which constitute about 76 per cent
Mr. Lawal said the net federally collected revenue in 2013 was N6 trillion, while oil revenue accounted for 76 per cent of all net revenue accruing to federal government.
He also stated that while the GDP in 2013 was 9.8 per cent, the Value Added Tax, VAT 16 per cent; Customs 9 per cent and non-oil tax increased from N1.5 trillion in 2010 to 2.1 trillion in 2013.