The Ogun State government has blamed the state’s current huge debt on the rise in the exchange rate of a dollar to a naira.
The government also claimed to have inherited N142 billion debt from the previous administration, led by Ibikunle Amosun.
Presenting the breakdown of its 2023 budget to journalists on Wednesday, the state commissioner for Finance, Dapo Okubadejo, said the state’s economy is viable to carry its debt burden.
Mr Okubadejo said, “Sometimes we are penny wise and pound foolish. We need to change our mind-set about debt because it is just looking so political.
“When we came in 2019, the debt profile of Ogun State was about N142 billion. The foreign debt component of that was about 121 million dollars. Just take that 121 million dollar at N450 today from N220 or N200 in 2019. What it means is that when we quote in the Naira figure today, there is an exchange rate implication on that 121 million dollar debt today.”
The state assembly passed the state’s 2023 budget into law on 30 December.
Mr Okubadejo spoke a few weeks after the opposition Peoples Democratic Party (PDP) governorship candidate, Ladi Adebutu, accused the state government of plunging the state into incurable debt.
Mr Adebutu alleged that the Dapo Abiodun – led administration increased the domestic debt of the state by 55.4 per cent between 2021 and 2022.
Mr Adebutu further stressed that the domestic debt rose from N155.57 billion in 2021 to N241.78 billion by June 2022.
According to the Debt Management office, Lagos, Ogun and Rivers are the three most indebted states in the country.
While Lagos owes N780.48 billion; Ogun, owes N241.98 billion; and Rivers, N225.51 billion.
However, according to the DMO, the domestic debt stock for Rivers State was as of September 30, 2021.
But during the briefing Mr Okubadejo insisted that it is wrong for anyone to compare the debt profile of Ogun to any other state without putting into consideration the economic viability and the capacity of the states.
Mr Okubadejo who doubles as the Chief Economic Adviser to Governor Abiodun said, “Obtaining loans shouldn’t be a problem, but the judicious use of the loan.”
The finance commissioner who was flanked by the commissioner for Budget and Planning, Olaolu Olabimtan, said, out of the N142 billion debt inherited from the previous administration, $121 million was foreign debt.
Mr Okubadejo argued that the fact that Lagos State has the highest debt does not make it a poor state.
“There seems to be a lot of misconceptions about debts generally. You cannot talk about debt in isolation. You cannot generally compare debts of one state to the other without doing some very in-depth analyses because the sizes of the economies of states are different.
“If two states have the same level of debts, the question you need to ask yourself is, ‘is the state, based on its size of economic activity, able to withstand this debt’?
“It is wrong to compare the debt profile of Ogun to any other state without taking into consideration these things. We also have to look at debt service. Debt service in a nutshell is what your capacity to carry this debt is, the only means of carrying capacity is your revenue.
“A state that is doing N100 to N120 billion in revenue and having a debt of N100 billion, means that this state can, if it wants to pay back the debt in one year,” the finance commissioner said.
