In light of foreign exchange fluctuations, the state governments of Ekiti, Cross River, and Ogun are seeking to temporarily halt their repayment of $501 million in foreign debt.
The Federal Account Allocation Committee’s March 2024 meeting minutes revealed the details of this proposal.
This move is aimed at easing the burden of debt servicing, which officials claim has significantly impacted their ability to meet current debt obligations.
According to data from the Debt Management Office, these three states hold the highest foreign debt stock as of December 2023, primarily from multilateral and bilateral loans.
Among the states, Cross Rivers leads with a debt of $211.13 million, followed by Ogun with $168.8 million and Ekiti with $121.1 million.
The finance commissioners of these states expressed concerns about the ongoing foreign exchange instability affecting their loan repayments.
They also highlighted the challenges arising from reduced allocations from the Federal Account Allocation Committee, stemming from debt repayments and deductions from monthly earnings.
Ekiti State’s Commissioner of Finance, Akintunde Oyebode, noted a substantial rise in deductions from the states’ statutory revenue for foreign loan repayments due to escalating exchange rates.
He emphasized the necessity of thorough discussions on exchange rate policies in relation to multilateral financing to address this issue effectively.
Additionally, he raised alarms regarding the reduced savings from monthly revenue, leading to a significant decline in Sub-nationals’ balances.
In similar concerns, Cross River State’s Commissioner of Finance, Michael Odere, expressed worries about the state’s ability to finance crucial capital projects given the declining revenues.
Dapo Okubadejo, the Commissioner of Finance for Ogun State, proposed reallocating the previously earmarked N200 billion savings back to the federation account for equitable redistribution among the states.
“The HCF, Ogun States, on his part, proposed that the N200 billion set aside as savings should be returned to the Federation Account for distribution to the beneficiaries,” as stated in the minutes.
Furthermore, he recommended the establishment of a robust system to address foreign exchange volatility concerns linked to multilateral financing.