Lagos State Debt For Beginners: The Numbers That Count

“The fatal attraction of government is that it allows busybodies impose decisions on others without paying any price themselves. That enables them act as if there was no price, even when there are ruinous prices, paid by others.” 

It isn’t normal to hear someone quote Thomas Sowell on a hot afternoon at Iya Eba, my favourite lunchtime spot. But this is what happened to me last week.  I walked into my favorite lunchtime spot, Iya Eba, when I met my good sparring partner “Senator” who was holding court, discussing the sorry state of Lagos State debts with a group of hangers on. You’re allowed to take this discussion with a pinch of salt, it is all a figment of my imagination.

Senator: Lagos State Government is so reckless! Imagine, they borrowed so much that our poor state now owes its creditors over N1 trillion. When I am elected Governor, we will make sure such senseless borrowing never happens again.  Fashola really bought his economic advisers at night market!

Me: Haba senator! You said Lagos State owes N1 trillion, can you explain how you arrived at that amount?

Senator: Akin, why are you questioning me? I have said mine; if you have yours, let us hear it.

How Much Does Lagos Owe?

Me: Ok, let’s start from what Lagos State says about itself.  Ben Akabueze, the state’s Commissioner of Budget and Planning, says Lagos owes N435 billion, not N1 trillion like you said.

Senator: Look at this man, are you a learner? A government official says something and you are stupid enough to believe him? Please tell us something new.

Me: Okay, so you know this debt is borrowed from two sources, domestic and foreign lenders. The domestic debt was issued using two bond programs, the N275 billion and N167.5 billion programs. Under the N275 billion program, the state actually raised N107.5 billion in two tranchesN50 billion in 2009 and N57.5 billion in 2010; while under the N167.5 billion program, it raised the entire amount – N80 billion in 2012 and another tranche of N87.5 billion in 2013.

On the other hand, the information on foreign debt is available here: and Governor Babatunde Fashola’s 2014 budget presentation





Maturity Date


Outstanding Debt

February 2009

N50 billion




April 2010

N57.5 billion



N57.5 billion

December 2012

N80 billion



N80 billion

November 2013

N87.5 billion



N87.5 billion




N225 billion


$1 billion



N160 billion


$400 million



N64 billion




N224 billion




N449 billion

Senator: How do we know you are telling the truth sef? The first bond was for N275 billion; why didn’t they finish issuing that one before raising another bond? How are we sure they didn’t issue that one completely?

Me: Oga, you remember that bond programs have a two year expiration period. If you don’t complete the issuance within that period, you will need to issue the outstanding under another program. Now, if you add the four series, you will realize the total is N275 billion, which is the original amount the state wanted to raise with domestic debt.

N50 billion in 2009

– N57.5 billion in 2010

N80 billion in 2012

– N87.5 billion in 2013

After a few minutes of reviewing this calculation, my new friends changed the topic from the amount of debt and focused on the state’s ability to repay these “huge” loans.

How Will This Debt Be Repaid?

Senator: You know Section 223(1) of the Investment & Securities Act caps the total loan portfolio of a State at any particular time at 50% of the revenue generated in the previous year. That means that if a state currently owes N50 billion, it cannot borrow any more money unless its revenues grow beyond N100 billion. So how does Lagos State owe N449 billion, yet last year’s revenues closed at N400 billion, which means the state’s debt is 112% of revenues?

Me: Good point; but the Federal Ministry of Finance gave Lagos State a special dispensation to limit its borrowing to 50% of the revenues earned in the last 3 years and not a single year. Since Lagos State earned a total of N1.1 trillion between 2012 and 2014, the debt of N445 billion is only 41% of cumulative revenues and within the threshold. 

Senator: I don’t understand finance, but all this numbers you are sharing does not tell us how the state will pay. 

Me: Sir, there is something called a Consolidated Debt Service Account (CDSA) where the state contributes a fixed sum of its federal allocation and at least 15% of its internally generated revenue (IGR) per month. Currently, I understand the state puts about N5 billion in this account every month.  This type of account is called a sinking fund and it ensures when the debts mature, there is enough money in the account to pay the bond holders. For example, the N50 billion that matured in March was paid from a similar account.

Senator: So how do you know whose money is inside that account? Did you not say the state issued four bonds?

Me: Each bond issuance has its own CDSA to ensure there is a clear separation of all the accounts. Today, Lagos State already has about N45 billion in the sinking fund accounts; by contributing N5 billion per month, the state will have accumulated enough money to pay out all its bond obligations by 2017 and also continue to honour the multilateral debts obligations.

Senator: Hmm… But you people that praise Lagos State will now abuse other states and the Federal Government for borrowing. There is God o!

Me: Oga, khaki no be leather. There is a big difference in the fiscal position of Lagos and these other states you speak of.

Senator: How do you mean?

Me: Let me explain. Lagos is the only state whose IGR comfortably covers its recurrent expenditure, which means it is not dependent on the Federal Allocation for survival. If a state’s recurrent expenditure cannot be paid from the revenue generated by the state, it means the state will virtually collapse if Federal Allocation disappears.

Apart from this, Lagos is one of the few states whose IGR is at least 50% of its debt. 

Finally, Lagos is the only state that earns more revenue from IGR compared to Federal Allocations. On these three metrics, Lagos is the most financially independent state in Nigeria.

Senator:  These are all lies, how do we know you are not making this up. Look at Bayelsa for example that has only 2 million people, how can you say Lagos State is in a better position than that state.

Me: Oga, please look at this napkin; I have done the calculations for you to see. Bayelsa is actually one of the weakest states in the federation.  Unlike Lagos, Bayelsa’s IGR can barely buy the tissue paper used in government house.



IGR/Total  Debt


IGR/Total Revenues





Akwa Ibom




















Senator: That’s how all you people use grammar to lie. Next time, you will join the governor to say the budget is balanced when the state owes so much money. How can a budget be balanced with that much debt?

Me: Ah, oga, you’re falling my hand o! The debt is amortized over the repayment period. This means if Lagos State owes N300 billion over 5 years, you only recognize N60 billion in the budget. If you look at the forecasts shared by the government, the budget will balance next year. As long as capital spending remains constant around N250 billion, recurrent expenditure grows by 10% to N260 billion, and IGR grows to N400 billion, the state will most likely balance the books. 

How Has This Debt Been Used?

Senator:  Okay, so we borrowed money to build that expensive treadmill between Lekki and Ikoyi? Is that what we should be borrowing for, fancy bridges and beautification projects? 

Me: We can argue about the need for a Lekki-Ikoyi Bridge or the quality and speed of road construction; perhaps the state does not need a rail line from Okokomaiko to Marina or to protect the shoreline from Alpha Beach to Goshen Estate; but it is clear that Lagos has huge infrastructure needs which must be met quickly as the city transforms into a megacity. Anyway, look at this sheet; it contains a schedule of completed projects thanks to the bonds.  


·      8 eight major roads to the Abule-Egba/Ekoro/Agbelekale and Ifako-Ijaiye communities.

·      1.5 kilometre upgraded Dr Nurudeen Olowopopo Avenue in Alausa

·      3 major roads including Joseph Dosu, Old Cemetery and Market Roads in Badagry Town

·      A network of three roads in Ojo Local Government Area; Shibiri Etegbin Road, Imude Road and Ajangbadi-Ilogbo Road


·      100 -bed Maternal and Childcare Centre in the Ikorodu .

·      100 –bed capacity Maternal and Childcare Centre in Isolo.

·      20 -bed Accident and Emergency Centre at the Lagos end of the Lagos – Ibadan Express way

Environment and Physical Planning

·      Refurbished City Hall in Central Lagos (You remember this place, Senator?)

·      Shopping Complex and a Drivers' Institute  in the Ikorodu

·      Provided 2 aerial ladder platform fire trucks, 1 foam fire truck, 5 rapid response utility fire fighting vehicles and eight 10,000 litres water tankers to the Lagos State Fire Service

·      1st phase of the New Oluwole Urban Market in Central Lagos

·      Largest purpose built Court House in Nigeria – the Igbosere Magistrate Court.

Water Supply

·      2 million gallon capacity Water Works to the Abule-Egba/Ekoro/Agbelekale and Ifako-Ijaiye communities

·      Micro – Water Scheme in Apapa

·      2 Million Gallon per day Mini-Waterworks in Ajangbadi Town



·      166,629 desks and chairs to public primary and secondary schools in the State

·      Eko Secondary Education Project.

·      103 classrooms comprising of both rehabilitated and new classroom blocks at the Ikeja Cantonment and Agidingbi Grammar School


Food Security

·      Increased Local Food Crop Production from 1.452m metric tons (2007) to 2.103m metric tons (2010)

·      Increased Livestock from 1.765m metric tons (2007) – 2.005m metric tons (2010)

·      Increased aggregate Fisheries Production from 0.249m metric tons (2007) to 0.255m metric tons (2010)

·      1,500 Youths Benefited from Agricultural Youth Empowerment Scheme (YES) Project from 300 Youths (2007)


·      2,300 housing units provided

·      9 housing estates completed

·      4,808 industrial schemes developed

·      400 flats earmarked for staff mortgage scheme take-off

·      Freedom park complex (old broad street prisons) – I like this one a lot. Senator, the Star there is very cold.


We can continue to argue about how the proceeds are used, but I suggest you start by interrogating the authenticity of these claims.

Senator: Na you sabi

Me: Thank you for the conversation, have a nice day.

Senator: You sef, thank you. Barman! Let me drink one cold Star for this hot sun jare.

Akin is a founding member of For the Future (FTF), a political action committee affiliated with the All Progressives Congress (APC)

Photo: Victoria Island, Lagos. Credit: