Federal Government Deducts Over N415bn from State Allocations to Service External Loans
According to data from the Federation Account Allocation Committee Disbursement reports published by the National Bureau of Statistics, the Federal Government has deducted over N415 billion from state government allocations to service their external loans.
These deductions occurred between 2019 and 2023 from the allocations given to state governments from the Federation Account, managed under a legal framework allowing funds to be shared under three major components: statutory allocation, Value Added Tax distribution, and derivation principle.
Analysis of the report reveals that deductions incurred by the sub-nationals were N57 billion in 2019, N74 billion in 2020, increasing to N86.2 billion in 2021, N78 billion in 2022, and N120.01 billion as of December 2023. This significant increase of 110 percent highlights the country’s substantial debt amidst dwindling revenue.
Lagos State was the most affected by the deductions, with approximately N131.1 billion deducted for external debt servicing, followed by Kaduna with N45.85 billion, and Cross River with N21.59 billion deducted. The least affected states were Borno (N1.55 billion), Yobe (N2.1 billion), and Zamfara (N2.1 billion).
Despite heavy debt servicing, the federal government continues to borrow to finance expenditures. In the first six months of President Bola Tinubu’s administration, the government borrowed N4.94 trillion from domestic sources, leading to a significant increase in domestic debts.
Furthermore, Nigeria spent N7.8 trillion to service its debt obligations in 2023, a 121 percent increase compared to the previous year. Increased borrowing was observed from the African Development Bank and the Exim Bank of China.
These actions contradict promises made by the Tinubu administration to reduce borrowing and focus on increasing revenues.
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