A recent analysis of official data has revealed that at least 10 Nigerian states have collectively increased their domestic debt by a whopping N417.7 billion year-on-year, despite receiving record-high revenue allocations from the Federation Account Allocation Committee (FAAC). The Debt Management Office’s quarterly reports on subnational debt show that Rivers, Enugu, Niger, Taraba, Bauchi, Benue, Gombe, Edo, Kwara, and Nasarawa states have raised their combined debt stock from N884.9 billion in Q1 2024 to N1.3 trillion in Q1 2025, representing a staggering 47.2% year-on-year increase. This alarming trend raises serious questions about fiscal prudence and the long-term sustainability of borrowing at the state level. Despite improved FAAC disbursements, fueled by rising oil prices, naira devaluation gains, and revenue freed up from petrol subsidy removal, these states are borrowing more, not less.
Not All States Are Struggling:
However, not all Nigerian states are following this trend. Some states, such as Abia, Akwa Ibom, and Delta, have managed to keep their debt profiles relatively stable or even reduce their debts. These states serve as examples of effective fiscal management, demonstrating that with prudent financial planning and strategic revenue generation, states can maintain financial stability and avoid the debt trap.
Fun Fact:
Did you know that the total domestic debt of all 36 Nigerian states and the FCT stood at N21.7 trillion as of December 2023? This staggering figure highlights the need for states to adopt sustainable fiscal practices and improve their internally generated revenue.
The Debt Figures:
- Rivers State tops the list with a domestic debt stock of N364.39 billion, a 56.7% year-on-year increase
- Enugu State’s debt more than doubled, rising from N82.48 billion to N188.42 billion, a 128.4% increase
- Taraba State more than doubled its domestic debt from N32.64 billion to N82.93 billion, a 154.1% year-on-year rise.
Expert Insights:
- “The trend of increasing debt despite higher allocations is concerning,” says Teslim Shitta-Bey, Chief Economist at Proshare Nigeria LLC. “States need to develop sustainable fiscal strategies and improve their internally generated revenue.”
- “The overreliance on federal allocations is a major driver of fiscal fragility,” notes Adewale Abimbola, a Lagos-based economist. “States must develop competitive sectors and improve the ease of doing business to reduce their dependence on allocations.”
What’s Next?
As the debt burden continues to mount, Nigerians are left wondering what the future holds for these states. Will they be able to service their debts and deliver essential services to their citizens? Only time will tell.
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