As politicians in Cross River State begin to jostle against 2023, it is important for everyone to be reminded of what is one of the State’s biggest challenges – It’s debt burden.
Going by 2019 records, Cross River State owes more than N230 billion. This debt is divided into external debt of $209million and domestic debt of N167 billion. Between 2014 and 2019, the State’s debt burden grew by a staggering 78% from N130 billion to over N230 billion.
Within the last 12 months, our State’s debt challenge has been compounded by the falling value of the Naira. Between December 2019 and September 2020, the Naira was devalued by 25.98% from N305.9/USD1 to N380/1USD. This means that for every $1(USD) borrowed prior to 2020, taxpayers must repay an extra N74.1. You don’t need a crystal ball to predict that the value of the Naira will continue to fall against the dollar. This means that even if the state does not increase its borrowing, its debt burden is still likely to keep growing.
The good or bad news (depending on how you look at it) is that the State will find it very difficult to increase its borrowing. This is because its debt to GDP ratio makes it very unattractive to lenders. Furthermore, the State is constrained by debt ceilings and safeguards imposed by the federal government.
Whoever becomes governor in 2023 will need to have a realistic plan for running the State without recourse to additional long term borrowing. To do this, the State will have to increase internally generated revenues (IGR) and significantly cut down its recurrent expenditure. This challenge is hardly one for a run-of-the-mill politician.
Iso Bassey is the founder of Academix NG. He is a Cross Riverian and writes in from the United Kingdom via iso.bassey@gmail.com