In a bid to alleviate financial strain exacerbated by severe foreign exchange volatility, the state governments of Ekiti, Cross River, and Ogun have jointly proposed the suspension of their foreign debt repayments totaling $501 million.
The proposal comes as these states grapple with heightened debt service burdens, significantly impacting their ability to meet existing debt obligations.
According to records from the Debt Management Office, these three states rank among the top 10 states with the highest foreign debt stock as of December 2023. Cross Rivers leads with $211.13 million, followed by Ogun with $168.8 million and Ekiti with $121.1 million.
Details of the proposal were unveiled during the Federal Account Allocation Committee meeting held in March 2024. The meeting, attended by finance commissioners from various states, highlighted the dire financial situation faced by these states due to rising exchange rates and reduced revenues.
Ekiti State’s Commissioner of Finance, Akintunde Oyebode, emphasized the escalating costs of foreign debt servicing, which have significantly reduced the state’s share of the Federation Account. Oyebode advocated for extensive discussions on exchange rates and multilateral financing to address these challenges.
Similarly, Michael Odere, the Commissioner of Finance for Cross River State, expressed concerns about the state’s ability to fund capital projects amidst dwindling revenues. He proposed the suspension of certain deductions, including those for multilateral loan repayments, during periods of fiscal shortfall.
Dapo Okubadejo, Commissioner of Finance for Ogun State, called for the redirection of previously earmarked savings back into the federation account for equitable redistribution among the states. Okubadejo also stressed the need for effective measures to address foreign exchange volatility impacting multilateral financing.
In response to these requests, Finance Minister Olawale Edun assured the states that discussions regarding foreign exchange, interest rates, and other economic challenges were ongoing at the National Economic Council. He encouraged the states to communicate their concerns through their respective governors for thorough consideration.
The recent disclosure by the Debt Management Office revealed a marginal increase in the total external debt stock of the 36 states and the Federal Capital Territory, reaching $4.61 billion by December 31, 2023. External debt servicing costs have also surged, indicating the urgency of addressing the financial distress faced by these states amidst the forex crisis.
