A recent report by a research firm says that Lagos accounts for about 40 percent of sub-national bonds in the market.
CardinalStone Partners in a report stated that the state’s rising debt profile has continued to create uneasiness among analysts.
This is in spite of the large size of the state economy with internally generated revenue of N276 billion in 2014.
However of the total sum, pay as you earn (PAYE) levy collected by the state government on residents and workers was about N154 billion while about N122.6 billion came from other sources.
However, a fraction of the centre of excellence debt to total internally generated revenue was about 80 percent, leaving not much left for other value adding capital projects.
This is coming at the time the new governor, Ambode Akinwumi, is seeking additional funds for its administration from investors.
In the pipeline is another US500 million (N100 billion) from the International Monetary Fund, the gesture which the Federal Government has supported.
In the light of the state debt profile which some pundits have continuously seen as threatening to the good governance of the state, CardinalStone Partners noted in its report that they see downward revision in credit rating of several states because of fiscal pressure.
The total sub-national bond market is at around N484 billion according to CardinalStone.
Of the total value, Lagos share about N194 billion in spite of the state favourable internal generation revenues.
CardinalStone conceded that Nigerian state governments have proven to be incapable of efficiently managing their financial resources, with 19 states out of 36 states demanding Federal Government assistance to fund a backlog of salaries owed.
“The growth in salary backlog is as a result of their over dependence on federal allocations which is directly tied to federal revenues.
Thus the prolonged crash in crude oil prices has meant that state revenues will remain depressed and fiscal pressures sustained”; the firm noted. Proper administration of some states hit bumps since the beginning of the year without sound strategic initiative from State secretariats on how to unbundle their debt portfolios.
As a result of dwindling Federal Government revenues which translate to reduced allocation to states, some states are finding it difficult to fully engage their sub-economies.
For now, state governments have a collective debt of N658 billion exclusive of their bond issues and outside their recent borrowing spree. Meanwhile, during the period of former Governor, Babatunde Fashola, the size of the state economy moved up significantly on the back of increased internally generated revenues (IGR).
This was as a result of the administration interest, focus and zeal deployed to block fiscal leakages.
Even for that, the state leveraged heavily on credit and had caused so much discordance among the stakeholders as to whether the accessed funds were optimally applied to developmental projects.
The issue is also generating heat among some residents whether the State government projects were selectively applied. Given the magnitude of the debt profile, some argue that there seems to have been some developmental projects misplacement.
The recent ordeal of the Fashola administration left much to be desired as cases of overvaluation of projects came into limelight as result of broken relationship among the power brokers in Lagos.
The fallout at the governing caucus brought out about overvalued contracts with incumbent governor reversing its predecessor’s decisions.
Dissatisfied residents are complaining that the projects on ground are even far less than the State’s income capacity, therefore the need to heavily borrow from other sources raise eyebrows.
Lagos has highest internal generated revenues as well as potential income sources. The last administration did well in blockade of revenue loopholes and developed a fairly better tax system which increased her fiscal capacity.
While it can be generally accepted that the State has witnessed tremendous improvement, it came at a very high cost that even restless residents will have to bear. Indirectly, it implies that the State has spent part of her future earnings yesterday.
As regard the face lift that has been done so far, Lagosians are lamenting that highbrow area were given more attention than other developing communities in Lagos.
The implication of the State financial leverage to developing projects which enhance her capital formation directly mortgage future stream of earnings. By implication, the current government may be engrossed in servicing existing debts.
Meanwhile, the history of the state’s liability, domestic and foreign, predates the erstwhile Governor tenure. The total amount owe is expected to be paid in the next forty years.
Initially, the stated had owed N15 billion between fiscal year 1999 through to 2007 under the leadership Bola Ahmed Tinubu until it skyrocketed.