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Bayelsa, six other states fail DMO's solvency test

By The Citizen
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Bayelsa and six other states in the country have failed the domestic debt sustainability analysis undertaken by the Debt Management Office (DMO).

According to the report, which the DMO board, headed by Vice President Namadi Sambo met on Tuesday to consider, the seven states' domestic indebtedness relative to their IGR positions ranks high beyond the recommended international threshold of between 92 per cent and 167 per cent.

Indeed, the affected states, according to the report on Pages 26 and 27, are presented in pink colour signifying the danger level of their indebtedness. Those next to this endangered category are stated in yellow while states whose positions are healthy are presented in green colour.

Bayelsa led the heavily indebted states with a score of 1,712 per cent insolvency.

The state has a domestic debt stock of N162.82 billion as at the end of December 2011, while its IGR was put at N9.510 billion.

It was followed by Cross River State, which by end of 2011 had a domestic debt stock of N90.750 billion, relative to its IGR size of N16.553 billion.

The debt management agency said the state's indebtedness ratio is 548 per cent far above the recommended threshold.

The third in this category was Zamfara State, which scored 497 per cent, representing its total domestic debt of N12.968 billion relative to its N2.611 billion IGR.

Ebonyi State was next in line with a score of 272 per cent, representing her domestic debt stock of N40.239 billion relative to her IGR of N14.778 billion.

Oil-rich Delta State came fifth with a rating of 263 per cent as the state's domestic debt stock then was N90.843 billion, while its IGR stood at N34.601 billion.

Adamawa State followed with a rating of 217 per cent, with a debt stock of N25.954 billion, while its IGR stood at N11.948 billion.

Kogi State was seventh on the league with a solvency score of 207 per cent score, representing its indebtedness of N34.122 billion in relation to its IGR of N16.500 billion.

The Federal Capital Territory (FCT) too was presented in the same pink colour among the seven risky states, though its debt figure was not presented on the table.

The DMO offered explanation on the solvency exercise relative to IGR: 'Given the fact that sustainability or otherwise of domestic debts are by best practice to be measured against the own revenue of the borrower, an analysis of the domestic debts of the states to their IGR was also undertaken.

'For this, the Debt Relief International (DRI) solvency threshold of 92 per cent to 167 per cent is applied. The result as shown in the table below outlines the need for the sub-national governments to grow their IGRs to reduce excessive pressure on their statutory allocations in the running of their governments and free up resources for other developmental projects.'

Six other states presented in yellow, signifying warning alert as they are close to attaining the solvency bar, are Edo, Akwa Ibom, Kwara, Ondo, Plateau and Taraba.

The remaining states presented in green all scored below the recommended solvency ratio of 92 per cent.