FAAC: Debt Servicing Gulps Allocation For Ondo, Osun, Two Others
Most of the Federal Accounts Allocation Committee funds for Osun, Ondo, Kaduna and Cross Rivers states will be used in servicing debts this year.
The states, as indicated in their 2024 budget may have to rely on Internally Generated Revenue or borrow from domestic/external sources to finance payment or possibly seek alternative solutions to settle their civic obligations to their workers throughout this year.
This is because these states currently have a deficit of N10.94bn, N27.72bn, N15.83bn, N10.02bn respectively following debt servicing deductions by the Federal Allocations Account Committee.
This latest development comes amidst a revelation by the Kaduna State governor, Uba Sani that inherited debt from previous administrations had stopped the prompt payment of salaries and more borrowings in the last nine months of his government.
The governor who made this known while addressing a Town Hall Meeting at the late Umaru Musa Yar’Adua Hall, on Saturday stated that his administration inherited a total of $587m, N85bn, and 115 contract liabilities.
He said, “Despite the huge debt burden of $587m, N85bn, and 115 Contractual Liabilities sadly inherited from the previous administration, we remain resolute in steering Kaduna State towards progress and sustainable development. We have conducted a thorough assessment of our situation and are sharpening our focus accordingly.”
Nigerians had hoped that with an increased statutory allocation of 40 per cent from the central government following the fuel subsidy removal, state governors should have more than enough to fulfil their statutory obligations.
In 2023, state governors got the most Federal Account Allocation Committee funds in at least seven years. The rise in FAAC allocations to the three tiers of government, especially the states, followed the removal of subsidy on petrol and currency reforms by the Tinubu administration.
However, according to an analysis using deductions for debt servicing and salaries from FAAC allocations, the four states may have a tough time embarking on quality infrastructural projects, including providing quality education and other benefits for their citizens/residents.
A cursory look at the external debt deductions showed that the federal government through the Debt Management Office have deducted N34.4bn in two months (January and February).
Meanwhile, the 36 state governments of the federation have earmarked a total sum of N849.28bn as payment for debt management this year.
A further breakdown of the data revealed that Lagos, Akwa-Ibom, Delta, Ogun, Zamfara, Plateau and Sokoto will be the highest debt-paying subnationals.
