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The state governments of Ekiti, Cross River, and Ogun have proposed the suspension of their foreign debt repayments, totaling $501 million, due to the challenges posed by foreign exchange volatility.
This proposal was highlighted in the minutes of the Federal Account Allocation Committee meeting held in March 2024, where state officials underscored the heightened debt service burden, which they claim has significantly hampered their ability to service existing debts.
As of December 2023, these states have the highest foreign debt stock, primarily due to multilateral and bilateral loans, according to data from the Debt Management Office.
Cross Rivers has the highest foreign debt at $211.13 million, followed by Ogun at $168.8 million and Ekiti at $121.1 million.
The state officials have expressed concerns over the strain on their ability to repay foreign loans due to the continued foreign exchange volatility.
They also raised the issue of reduced allocations from the Federal Account Allocation Committee (FAAC) because of debt repayments and deductions, which they believe are affecting their ability to fund capital projects.
Akintunde Oyebode, the Commissioner of Finance of Ekiti State, pointed out the significant increase in the amounts deducted from the statutory revenue of the states for the repayment of foreign loans due to the rising exchange rate.
He suggested the need for extensive discussions on exchange rates concerning multilateral financing to address this issue.
Additionally, he expressed concerns about the amount deducted as savings from the monthly allocation, noting the reduction in the balances of the Sub-nationals.
Michael Odere, the Commissioner of Finance of Cross River State, also voiced fears about the state’s ability to fund capital projects due to reduced revenues.
Dapo Okubadejo, the Commissioner of Finance of Ogun State, proposed redirecting the N200 billion previously earmarked savings into the federation account for state redistribution.
This move by the three Nigerian states highlights the growing concern over foreign exchange volatility and its impact on debt repayment and the overall economic health of the states.
It remains to be seen how the federal government and other stakeholders will respond to these proposals, and whether it will lead to a broader discussion on debt relief and economic sustainability in Nigeria.
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