By NWAODU LAWRENCE

DEBT MANAGEMENT: A TEST-CASE STATE

State Economic Dashboard:

Civil Servants – 15,276

Pensioners – 11,158

Population – 6.35 million

Ease of Doing Business – 11 out of 36 States in Nigeria.

GDP – 7,684,878,450,359 (the 4^th biggest in the country).

2023 Imo State Budget – 592 billion Naira Approx. (118 billion Naira supplementary budget inclusive)

Gross FAAC Receipt – 72.11 billion Naira Approx.

IGR – 20.48 billion Naira

Total Revenue (Aides & Grants inclusive) – 103.58 billion Naira

Domestic Debt – N204,224,291,725.13

External Debt – 51,094,668.50 US Dollars.

Total Debt (at current unified FX rate) – N242,545,542,000

Debt to Revenue Ratio – 234.16percent

Budget to GDP Ratio – 7.73 percent

Debt Servicing/Repayment

- 2021 – 14.7 billion Naira

- 2022 – 21 billion Naira

Ideal Tax Income at 1 percent baseline of the State economy – 76.85 billion Naira

ACTUAL STATE TAX INCOME – 20.48 billion Naira

Looking at the indices and available data above, suppose those are the numbers from your own State, how important is (would be) the State Fiscal Policy as regards –

(1) The Data from the Test-Case State shows a Revenue Balance of 9.42 billion Naira after Operating Expenses and Loan repayments, out of a Total Revenue of 103.58 billion Naira; how will you as the Governor pay for any Capital Expenditures and bring development, progress, growth and attract investments to your State and create employment and the much sort-after dividends of democracy, with only less than a 10 percent of your Total Revenue available to work with? This is so important because this fiscal posture is akin to what is obtainable in most states in Nigeria, hence providing a credible and empirical solutions to this fiscal scenario is a testament to your ability and capacity to deliver on the job at hand in your state if given the opportunity.

(2) With an annual Debt cost of 21 billion Naira and a Total Debt Stock of 242.546 billion Naira, and a Debt to Revenue Ratio of 234.16 percent, where would you get the fiscal latitude to work with, when your Debt burden is more than twice your Total Revenue, and your Debt Servicing is 21 billion Naira, as against your IGR of 20.48 billion Naira – where will you get the breathing space? Who will grant loan to an entity with a Debt to Revenue Ratio of 234.16 percent, and a Debt servicing cost of almost 105 percent of the independent revenue?

(3) Debt Sustainability ratio ceiling is 125 percent and your State is already at 234.16 percent. If that were your own statistics, knowing you have outshoot your credit ceiling and only left with less than 10 percent of your Total Revenue after OPEX and Debt Servicing, how would you work your finances to still deliver on your campaigns promises and your vision for your State?

(4) With just a less than 10 percent of your Total Revenue at hand, how would you ensure a Serene and peaceful environment and State for your people in these times of insecurity, banditry and restiveness – to at the least ensure a secure State that lives and properties of your people will be guaranteed, knowing that Security Management is very expensive?

(5) With the Fiscal position of the State and the need to provide security and protect lives and properties, how do you ensure regular payments of salaries and pensions to the Civil Servants and Pensioners in your State, not minding the demands security and infrastructure development is making on the finances of the state?

(6) With a Debt to Revenue Ratio of 234.16 percent, and Debt Servicing to IGR of about 105 percent, and a mere less than 10 percent of Total Revenue available for CAPEX, how would the State ensure its debilitating fiscal position does not slide to Circlical Debt dysfunctional structure, that may get the fiscal position so intractable and enmeshed in never-ending Debt burden that may consume the Total Revenue in servicing cost, leaving the State to struggle with OPEX and CAPEX, or that may even create a Debt binge for the State, with an unstoppable credit craving, since the options are few by the way?

(7) Repayment Planning – what is the State Debt Repayment Strategy, even in the current Debt to Revenue position, and the enormous servicing cost to the State (IGR).

Is the state taking the route of Amortisation planning, in structured guaranteed Annuities Repayment and how will this be funded without affecting the ordinary cause of governance and the provisions of infrastructures, security and welfare to the people?

Is the State working on any foreseeable Sinking Fund Mechanism to save-up for Debt retirements and other obligations maintenance, and how will the setting aside and creation of this Fund not affect the already cash-starved State Balance Sheet, that is gasping for liquidity?

(8) How can the State utilise Fiscal Efficiency, (especially in the frugal management of Overheads) to solve their Revenue Challenge and the Debt burden?

(9) Etcetera.

•TO BE CONTINUED. Being Part 3 of the series entitled “Hot questions for governors as off-season elections draw close”. Dr Nwaodu Lawrence, a Development Economist, writes from Owerri, Imo State.

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