In an alarming revelation, the Federal Government has implemented deductions exceeding N415 billion from state government allocations to service their external loans.
These deductions, spanning from 2019 to 2023, have been siphoned from the allocations disbursed to state governments from the Federation Account. The Federation Account operates under a legal framework facilitating fund allocation through statutory allocation, Value Added Tax distribution, and derivation principle.
A detailed analysis of the report exposes a concerning trend: deductions escalating from N57 billion in 2019 to a staggering N120.01 billion as of December 2023, marking a whopping 110 percent increase. This surge paints a stark picture of the country’s mounting debt amidst dwindling revenue streams.
Lagos emerges as the hardest-hit state, bearing the brunt of deductions totaling approximately N131.1 billion for external debt servicing. Following closely are Kaduna with N45.85 billion and Cross River with N21.59 billion deducted. Notably, states like Borno, Yobe, and Zamfara witnessed relatively lesser deductions, with amounts ranging from N1.55 billion to N2.1 billion.
The deductions, mostly fixed throughout the year except for minor fluctuations in January and February, reflect a consistent strain on state finances. Despite these substantial debt servicing obligations, the federal government continues its borrowing spree to sustain expenditures.
Recent reports reveal that the government borrowed a staggering N4.94 trillion from domestic sources within the first six months of President Bola Tinubu’s administration, signaling a concerning reliance on loans. This surge in domestic debts, coupled with a notable increase in debt servicing expenses, contradicts promises of reduced borrowing and a focus on revenue augmentation made by the Tinubu administration.
As Nigeria grapples with its escalating debt burden, the efficacy of fiscal policies and debt management strategies becomes paramount in ensuring sustainable economic growth and stability.
