After a lot of secrecy over its debt profile, the Lagos State Government on Tuesday finally opened up that it is currently indebted to the tune of N435 billion as at the end of 2013.
Despite this huge debt, the state government said the profile is still below the international borrowing benchmark adopted by the Federal Government.
State Commissioner for Finance, Mr. Ayo Gbeleyi, while making this disclosure during the presentation of the 2014 budget analysis by the Ministry of Economic Planning and Budget, placed the acceptable international borrowing benchmark at 40 per cent. He added that with regard to the state’s total debt stock currently, the state has about N435 billion, which is a net of N98 billion in sinking fund.
“To speak to sustainability of that figure, in terms of our total debt value, that is cost of loan repayment and interest to our revenue, that figure is about 13.15 percent”, he said.
“The acceptable international benchmark adopted by the Federal Government Debt Management Office is 40 per cent. We are well below that benchmark. In 2013, we were about 13.15 per cent and the benchmark is 40 percent. Our total public debt stock to GDP stood at 2.98 per cent in 2013.
“For a frontier economy like ours, the threshold that is allowed is about 20 per cent. As at last year, the ratio of our debt to total revenue is 112 per cent. That is total debt stock at the percentage of revenue. That is 112 per cent compared to the benchmark. The benchmark allows us to borrow up to 250 per cent of our total revenue.
“Again, we are well within that threshold. The last threshold is also regulated by the Federal Ministry of Finance under the Fiscal Responsibility Act. We are allowed to borrow up to 50 per cent of our last three years revenue. As at today, we only borrow 40 per cent of that threshold. So, it all gives parameter of international benchmark that measures our debt level. They are very sustainable and responsible”.
Gbeleyi added that three international and local agencies have rated not just the state government, but also its bonds; and when these are compared with the ratings of some countries like Angola in relation to debt profiles, Nigeria has a favourable position.
“In 2013, our bond rating by Agusto was AA+ and the same thing with GCR. Of course, Fitch did not rate our bond. Those are the key measures and parameters of our debt profile as it stands today”, he said, adding: “Our Agusto rating was, at a stage, A+ by Global Credit Rating; it was also AA+ by Fitch Rating International, our foreign currency long-term rating was AA positive and then our long-term national rating was BB minus able. The profile of the state was actually increased by its recurrent interest in bond issues”.
