FX unification: Lagos, Kaduna lead as states debts hit N3.46trn

The floating of the Naira on the foreign exchange market by the Central Bank of Nigeria (CBN) has shot up the debt burden of states in Nigeria with Lagos, Kaduna and Edo experiencing significant increases in their debt valuation.

After unification, the external debt stock of the 36 states and the FCT have increased by 41.9 per cent to N3.46 trillion, from N2.01 trillion using the new exchange rates of over N700 to a Dollar.

Before the apex bank’s new policy, the external debt burden of the 36 states and the FCT stood at $4.56 billion according to data from the Debt Management Office (DMO). Using the former CBN’s fixed rate of $1/471, the debt valuation in naira stood at N2.01 trillion.

However, using the new daily exchange rate monitor of N758/$1, the external debt stock has risen to N3.46 trillion- a 41.9 per cent increase since the unification.

Lagos state which has seen the naira equivalent of its $1.25 billion external debt increase from N588 billion to N947 billion. This was followed by Kaduna state whose $573 million debt increased from N269 billion to N434 billion. Others are an Edo state with $209m (N98.4 billion) and now N158 billion.

Furthermore, the naira equivalent of the Federal government’s external debt of $37 billion has risen from N17.5 trillion to N28.1 trillion.

The implication of this is that states will have to source more naira to meet the debt servicing of these loans and pay up these loans in a time of already strangled government revenues and ballooning government expenditure.

Professor of capital market, Prof Uche Uwaleke said devaluation of the Naira has increased the opportunity cost of servicing external loans in dollars when considered in naira terms.