An analysis of Oyo State’s budget performance report reveals that between 2021 and the first quarter of 2024, the state accumulated N229 billion in loans. In May 2024, the Oyo State House of Assembly sanctioned a N10 billion loan to support World Bank-assisted projects and the UBEC-SUBEB matching grant. Prior to this, the state had already borrowed N20.3 billion in the first three months of 2024.
Concerns about the state’s increasing debt were particularly pronounced in 2023. The budget performance report indicates a growing loan portfolio, with N51.4 billion borrowed in 2021, increasing to N73.3 billion in 2022, and peaking at N84.9 billion in 2023.
Rising Debt and Debt Servicing Costs
The state’s escalating debt levels have led to significant increases in debt servicing costs. From 2021 to the first quarter of 2024, Oyo State’s debt servicing expenditure rose dramatically, starting from N4.1 billion in 2021, increasing to N13.5 billion in 2022, and reaching N17.8 billion in 2023. By the first quarter of 2024, the state had already spent N9.5 billion on debt servicing.
Impact on Tax Revenue
A detailed analysis reveals that between 2021 and early 2024, approximately N4.7 out of every N10 paid by Oyo State residents in taxes was allocated to debt servicing. In 2021, debt servicing consumed N4.1 billion out of the N23.1 billion in tax revenue. In 2022, N13.5 billion was spent on debt servicing from a tax revenue of N26.5 billion. By 2023, debt servicing costs rose to N17.8 billion, while tax revenue increased to N34.4 billion. In the first three months of 2024, the state earned N10.1 billion in tax revenue but spent N9.5 billion on debt servicing.
Cumulative Analysis
From early 2021 to the end of the first quarter of 2024, Oyo State earned N94.1 billion in tax revenue and spent N44.9 billion on debt servicing. This represents 47.7% of the total tax revenue, indicating that nearly half of every naira earned from taxpayers was used for debt servicing during this period.
