The Debt Management Office (DMO) just put out a detailed report that reveals the eye-popping amount of debt carried by the six Southwest states in Nigeria.
By – Abayomi Odunowo.
According to a document obtained by Chronicles Post, the southwestern states of Ogun, Oyo, Osun, Lagos, Ekiti, and Ondo collectively owe a staggering N4.4 trillion in debt. This revelation sheds light on the financial challenges facing the region, highlighting the need for prudent economic management and sustainable debt repayment strategies.
The breakdown of the debt reveals that the states’ financial obligations are divided into domestic and external components. Domestic debt amounts to N1.8 trillion, while external debt stands at a daunting N2.6 trillion, equivalent to N1.7 billion dollars. The depreciation of the naira against the dollar has exacerbated the debt burden, with the exchange rate reaching N1500 per dollar in 2024, up significantly from previous years.
The external debt of the states is sourced from a variety of international lenders, including prominent institutions such as China Exim Bank, Japan International Cooperation Agency (JICA), India, KFW Development Bank in Germany, Islamic Development Bank (IsDB) in Saudi Arabia, and Agence Française de Développement (AFD) in France. Each state has unique debt profiles, with some relying on bilateral loans while others leverage multilateral financing strategies.
Ogun State, for instance, owes $168.8 million in external debt and N253.2 billion in domestic debt. Ondo State has a relatively lower external debt of $80.2 million but faces challenges due to its domestic debt of N150 billion. Similarly, Osun State’s debt profile includes $87.2 million in external debt and N130.8 billion in domestic debt, emphasizing the importance of sustainable debt management practices. Oyo State’s debt burden includes $63.8 million in external debt and N159.9 billion in domestic debt, showcasing the complexities of balancing fiscal responsibilities with developmental goals.
Ekiti State, known for its reliance on multilateral loans, has an external debt of $121 million and domestic debt of N110 billion, highlighting the struggles faced by smaller states in managing international borrowing. Lagos State, as the economic powerhouse of the region, stands out with a massive 1.2 billion dollars in external debt and over N1 trillion in domestic debt, bringing its total debt close to N2.8 trillion. This places a significant burden on Lagos, requiring robust fiscal strategies to sustain economic growth.
Beyond the financial implications, the debt revelations have far-reaching socio-economic consequences for the region. The states must prioritize debt repayment to avoid default and maintain their creditworthiness in the international market. Effective debt management strategies, coupled with prudent economic policies, are essential to ensure sustainable development and growth in the long term.
The debt burden facing the southwestern states underscores the need for proactive measures to address financial challenges and promote economic stability. By implementing sound fiscal policies and efficient debt management practices, the region can navigate its financial obligations and pave the way for sustainable growth and development.
Otunba Abdulfalil Abayomi Odunowo
National Chairman AATSG
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