State governments have bloated debt stocks

…Monthly allocation as loans collateral not sustainable- DMO boss

By Gbenga Adebola

The Debt Management Office (DMO) has said it would no longer be business as usual for state governments to borrow money and use federal allocation as collateral.
Speaking in Abuja when she received the Governor of Edo State, Mr. Godwin Obaseki, the Director General of DMO, Patience Oniha, noted that given the present economic challenges, the states who engaged in reckless domestic and foreign borrowing may not find it easy going forward, warning that the nation’s revenue was still under severe pressure.
According to her, it became very imperative for the government to take such a decision because there was no longer huge allocation to states from the Federation Accounts Allocation Committee (FAAC) from where borrowed funds could be deducted, adding that continuous exposure to new lines of borrowings may no longer be sustainable.
DMO boss said, “previously, we could rely on funds from FAAC and in addition to that, we could borrow both at the federal and state levels because there wasn’t any challenge. But I think the times have changed.
Revenues are under severe pressures, we are still dependent on oil revenues, non-oil revenues are picking up but that is still a journey.
“So it means now, and in future, we need to do things so much differently, we must be more strategic in the management of public finance so the language I always use in my previous work where I was at the Efficiency Unit is that its no longer business as usual.
“We can’t collect money from FAAC, borrow, continue and wait until the next month. So at various levels, we need to be more strategic and more creative in the things we do.
According to her, the law recognises the states for being responsible for fiscal laws relating to the states but “we decided to partner with them in the belief that Nigeria is one project, hence we should not be looking at the centre. We should be looking at the various tiers of government. So what we did in that regard was to work with the various tiers of the states to have enabling laws, create their own debt managements and then work with them through training and other activities to create their own domestic debt data.
“At the DMO, we have done a lot with the states in terms of assisting in developing their debt data, passing debt laws leading to the establishment of debt bureaux and so on. As we speak, we have a good understanding of the debt portfolios at the sub-national and I’m happy that Edo State is one of the states that is compliant in its debt data reporting.”