Kano State Government Suffers N44 Billion Loss on Foreign Debts Due to Naira Depreciation in 2023



 

The Kano State government has reported a staggering N44 billion loss on its foreign debt obligations in 2023, primarily driven by the depreciation of the naira against the U.S. dollar. This development, outlined in the state's 2023 audited financial report, is expected to place significant strain on its finances, potentially impacting the delivery of essential public services.

According to the report, the state recorded a loss of N44,074,983,000 under "Loss from Exchange on Foreign Debts," a sharp increase from the N2.69 billion recorded in 2022. In addition, public debt charges totaled N6.12 billion in 2023, slightly lower than the N6.84 billion spent in 2022.

A review of the state's budget performance for the second quarter of 2024 by Sahara Reporters revealed that Kano State spent a staggering N60 billion on public debt charges between April and June. This expenditure far exceeded the N4.6 billion allocated for debt servicing in the entire 2024 budget. The breakdown includes N1.6 billion for "Domestic Interest/Discount" and a substantial N58 billion for "Domestic Principal."

Disproportionate Spending on Debt Servicing

The N60 billion spent on debt servicing during this period dwarfs the state's investment in critical sectors. For example:

Only N628 million was allocated to the construction and provision of public schools.

N7.1 billion was spent on road construction.

The combined capital expenditure for the Ministry of Works and Housing and Water Resources amounted to N22.8 billion—far less than what was spent on debt servicing.


Furthermore, the state's total capital expenditure on the economic sector for the first half of 2024 stood at N36.8 billion, significantly lower than the N60 billion allocated to debt repayments.

Impact on Revenue and Salaries

The state's internally generated revenue (IGR) paints a concerning picture. Only N14 billion was raised in the first half of 2024, while debt servicing costs amounted to N60 billion—over four times the state's IGR. This fiscal imbalance is further underscored by the fact that the N60 billion spent on debt servicing surpassed the N42 billion spent on personnel costs, including salaries, in the same period.

Looming Financial Crisis

The alarming increase in foreign debt losses and disproportionate debt servicing expenses highlights the urgent need for fiscal reform in Kano State. The heavy debt burden, coupled with limited revenue generation, threatens the state's ability to invest in critical infrastructure, education, and other essential services.

As the state grapples with the impact of currency depreciation and mounting debt, the focus must shift towards sustainable fiscal management, revenue diversification, and strategic debt restructuring to safeguard the state's economic future and the welfare of its citizens.



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