By Ayomide Otitoju
Lagos State Governor Babajide Sanwo-Olu has dismissed concerns regarding the state’s growing debt, assuring the public that Lagos remains within the acceptable debt ratio despite being Nigeria’s highest debtor.
According to the National Bureau of Statistics, Lagos recorded the highest domestic debt in Q1 2024, with N929.41 billion, followed by Delta State at N334 billion. However, speaking on Politics Today on Channels Television on Wednesday, Sanwo-Olu explained that Lagos’ debt-to-GDP ratio is still below the standard threshold, and therefore, there is no cause for alarm.
“The standard debt ratio we are meant to meet is about 40%, but today, we are less than 30%, around 28-29%. So we are not even close to the threshold,” the governor said, emphasizing that Lagos’ financial standing is strong.
Sanwo-Olu pointed out that the state’s rising debt should be viewed as an investment in the future. Back in February, he stated that Lagos has the capacity to handle up to N20 trillion in debt, describing the current N2 trillion debt as “just a number.” He added that the state’s ambitious projects require such borrowing to continue driving growth.
“There is no need to panic. The capacity of Lagos should allow for even more—up to N20 trillion. In fact, when preparing last year’s budget, my team initially proposed N6 trillion, but we settled on N2 trillion. This reflects the immense capacity Lagos has to manage its resources,” Sanwo-Olu said.
Budget Growth and Performance
Governor Sanwo-Olu also highlighted the exponential growth of Lagos’ budget since he assumed office five years ago. He noted that the budget had expanded from N620 billion when he took over to N2.3 trillion in 2024, with expectations to reach N2.5 trillion by the end of the year.
He further added that Lagos consistently achieves about 95% budget performance annually, with this year’s budget already 90% utilized. “We have tripled the state’s budget, and our performance has been exceptional. This year alone, we are well over 90% in budget performance,” he said.
Pros and Cons of Lagos’ Rising Debt
While Sanwo-Olu has assured that Lagos’ debt remains manageable, the rising debt profile has both advantages and disadvantages. On one hand, borrowing enables the state to fund critical infrastructure projects and boost development. With Lagos being a metropolitan hub, these investments could lead to long-term economic growth and increased revenue generation.
On the other hand, high debt levels could pose challenges if not well managed, potentially leading to a heavy debt-servicing burden in the future. Critics might argue that despite the state’s capacity, excessive borrowing could limit future fiscal flexibility and strain public finances if economic conditions worsen.
As Lagos continues to expand its budget and debt capacity, striking a balance between development and debt sustainability will remain crucial.
