The state governments of Ekiti, Cross River, and Ogun have proposed a suspension of their foreign debt repayments worth $501 million due to foreign exchange volatility.
Details of these proposals were highlighted in the minutes of the Federal Account Allocation Committee meeting held in March 2024.
The proposal is part of their efforts to mitigate the heightened debt service burden, which state officials claimed has significantly hampered their ability to service existing debts.
The states have the highest foreign debt stock as of December 2023 due to multilateral and bilateral loans, data from the Debt Management Office showed.
Cross Rivers has the highest at $211.13 million, followed by Ogun at $168.8 million and Ekiti at $121.1 million.
The states’ commissioners of finance said the continued foreign exchange volatility had caused strain on their ability to repay foreign loans.
The commissioners also raised concerns about reduced FAAC’s allocation due to debt repayment and deductions as savings from the monthly allocation.
Akintunde Oyebode, Commissioner of Finance of Ekiti State, observed that there had been significant increases in the amounts deducted from the Statutory Revenue of the states for repayment of foreign loans due to the rising exchange rate.
He suggested the need for extensive discussion on exchange rates concerning multilateral financing to address the issue.
Furthermore, he raised concerns about the amount deducted as savings from the revenue for the month.
He noted that the balances of the Sub-nationals had reduced tremendously as a result.
On his part, the Commissioner of Finance of Cross River State, Michael Odere, expressed fears about the state’s ability to fund capital projects due to reduced revenues.
The Commissioner of Finance of Ogun State, Dapo Okubadejo, called for redirecting the N200 billion previously earmarked savings into the federation account for state redistribution.
“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.
“On the issue of multilateral financing, he proposed that a system should be put in place to effectively address issues associated with foreign exchange volatility,” the mitutes disclosed.
FX crisis pushes three Nigerian states to demand $501m loan repayment suspension
