Daud Olatunji
Lagos State remains Nigeria’s most indebted state with a staggering debt stock of N2.18 trillion, a 58.23% increase from the N1.37 trillion it held in 2022, according to a report by BudgIT.
PLATFORM TIMES reports that this debt includes a significant dollar-denominated component of $1.24 billion, representing 51.62% of Lagos’s total debt profile, which exposes the state to exchange rate fluctuations.
The state’s foreign debt challenges intensified following the devaluation of the naira from N448.08 per dollar at the end of 2022 to N899.39 per dollar by the close of 2023.
Consequently, Lagos’s dollar-denominated debt grew by N557.28 billion in naira terms, underscoring the financial impact of exchange rate volatility on its fiscal health.
“With 51.62% of Lagos’s debt in dollars, the state remains highly vulnerable to external economic pressures,” BudgIT’s report emphasized.
The report titled “State of State performance” read further that in terms of debt-to-revenue metrics, Lagos has surpassed the recommended public debt-to-revenue ratio of 50%, standing at a concerning 174.53%.
However, the state’s debt service-to-revenue ratio of 25.03% and personnel cost-to-revenue ratio of 16.06% remain within the recommended thresholds, suggesting Lagos can manage some of its financial obligations without immediate crisis.
The state’s operational expenses also surged in 2023, growing by a record 70.28% from N421.46 billion in 2022 to N709.89 billion.
This rise, the largest among Nigeria’s 36 states, stemmed from increased personnel costs, debt service expenses, and overhead costs.
Additionally, Lagos recorded a N105.39 billion movement in payables that had not been included in its 2022 operating expenses.
PLATFORM TIMES however observe tbat despite its rising debt and operating expenses, Lagos demonstrates resilience through its internally generated revenue (IGR).
The state reported an IGR of N840.45 billion in 2023, marking a 27.38% increase from N659.79 billion in 2022.
The IGR alone covered 118.39% of its operating expenses, underscoring Lagos’s financial strength and independence.
Tax revenue dominated Lagos’s 2023 IGR, constituting 80.69%, with non-tax sources contributing 19.31%. Pay As You Earn (PAYE) taxes grew significantly by N112.75 billion year-on-year, accounting for 62.14% of Lagos’s IGR growth.
Additionally, withholding tax revenue contributed N114.32 billion, or 13.6%, of total IGR, making it the second largest revenue stream. BudgIT noted.
“Lagos’s self-sufficiency is highlighted by its 67.68% IGR-to-total revenue ratio, the highest among Nigeria’s states, showing minimal reliance on federal allocations.”
Lagos’s total expenditure for 2023 was N1.49 trillion, an 18.83% increase from N1.26 trillion in 2022.
Breaking down the spending, the state allocated 13.31% for salaries, pensions, and other social contributions; 20.84% for debt obligations; 15.86% for overheads; 8.92% for subventions to parastatals, and 40.11% for capital projects.
Notably, capital expenditure declined by 8.21% from N651.2 billion in 2022 to N598.37 billion in 2023, while personnel and overhead costs rose by 18.21% and 54.23%, respectively.
Inflows from the Federation Account also grew for Lagos in 2023, reaching N329.69 billion—a 41.44% increase from N233.1 billion in 2022.
With an overall revenue of N1.24 trillion, Lagos accounted for 14.33% of the collective revenue of Nigeria’s 36 states and stands as the only state to surpass the N1 trillion revenue mark.
The BudgIT report highlights Lagos’s unique financial situation: a heavily indebted yet fiscally robust state with high IGR capacity but exposed to exchange rate risks.
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