LP Kicks Against Rising Debt Profile Of Lagos

Labour Party (LP) in Lagos State has kicked against the state’s rising debt profile.

The party said it is against the state government acquiring debt that their children’s generation would continue to pay over their life time, adding that Lagos has nothing to show for its “humongous debt”.

According to the state government budget performance appraisal report for the 1st quarter of 2023, which was released recently by the state Ministry of Economic Planning and Budget, Lagos total domestic debt as at December 2022 was put at N807.2bn, while domestic debt to external debt during the same period stood at 69 percent. Similarly, total revenue to total debt stock stood at 71.2 percent.

The report also revealed that total external debt as at December 2022 stood at $1.25bn, while total debt stock to GDP was 4.5 percent.

“The debt service to Gross State Income (GSI) ratio in Y2022 is 26.86 percent, a rise of 2.85 percent from Y2021, indicating a good balance between debt and revenue

“While this may encourage additional borrowing, policymakers must consider the current realities of borrowing costs as global interest rates rise.

“Our Analysis suggested that the government focus on increasing transparency in debt contracts in order to encourage debt restructuring and build trust among current and future creditor groups,” the report explained.

However, the domestic debt of the state has risen by N134.8 bn following two bonds issued by the state in the capital market.

Lagos raised the N134.8 billion long-tenure bonds in capital market for infrastructure development.

The instruments were signed by Governor Babajide Sanwo-Olu, on Tuesday.

The transaction instruments are for the first sets of allotment in the N1 trillion Debt and Hybrid Issuance Programme.

This includes a N115 billion 10-year 15.25 percent Series 1 Bond Issuance due 2033 and N19.815 billion 7-year 14.675 percent Fixed Return Forward-Ijarah Lease Sukuk due 2030.

With N807.2bn domestic debt as at December 2022, the recent N134.8 raised in capital market puts the state’s domestic debt at N942 billion based on THE WHISTLER analysis.

Speaking with THE WHISTLER on Saturday, the state LP Secretary, Sam Emeka Okpala said: “We are not favourably disposed to government acquiring debt our children and children’s children will continue to pay over their life time. And our concern is the fact that these monies, these debts, we do not have anything to show for them.

“There is nothing wrong with borrowing in first instance. But the truth is that: what are you borrowing for? Are you borrowing for consumption? Or you are borrowing to share? If you are borrowing to put infrastructure that will repay the loan, there is no problem about that.”

The LP Secretary stated that the state’s debt does not commensurate with available infrastructure in the state.

“As far we are concerned, Labour Party is saying that the debt on our neck and head is not commensurate with the supposedly infrastructure that money could have put in the state – that would make our lives better; that would make our transportation sector easier; that would make our health (care) affordable and available; that would improve on our agriculture – nothing.

“So what we hear is that they are borrowing and borrowing. Borrowing to do what? Our party is pained that we are in this situation. We are not comfortable with that,” he said.

According to Okpala, primary, tertiary healthcare is not there in the state, adding that movement is near impossible in Lagos.

“Lagos State government started building the rail line (Blue Line) from Okokomaiko to Marina since 2009. Up till this moment we are speaking, that project is yet to be delivered. It’s mind-boggling. About 11km rail line from 2009 till date. It’s 14 good years and that project is still ongoing when other countries have built longer and better modern rails in less than three, four years at a cost not in comparison with what Lagos State government told us they are paying for 11km rail,” Okpala stated.

He maintained that with about N50 billion monthly Internally Generated Revenue (IGR) that Lagos is reportedly raking in, the state has no business with borrowing.

“They tell us that Lagos is generating N50 billion monthly. So where are these funds? Where are they deployed? We are not even talking about that, you are now incurring more debts, borrowing more. The one you say you generate, we are not seeing the impact. With that kind of IGR in Lagos State, we shouldn’t have any problem or business with borrowing,” he added.