At least 10 Nigerian states have increased their domestic debt by a total of N417.7 billion year-on-year, despite receiving significantly higher revenue allocations from the Federation Account Allocation Committee (FAAC).
A review of quarterly reports from the Debt Management Office shows that Rivers, Enugu, Niger, Taraba, Bauchi, Benue, Gombe, Edo, Kwara, and Nasarawa states collectively grew their domestic debt stock from N884.9 billion in Q1 2024 to N1.3 trillion in Q1 2025 — a 47.2% increase. This trend raises concerns over fiscal discipline and the sustainability of subnational borrowing.
The data also reveals a quarter-on-quarter rise of 3.4% for these states, with their combined domestic debt growing by N42.3 billion from N1.26 trillion in Q4 2024 to N1.3 trillion in Q1 2025. This increase comes at a time when FAAC disbursements have improved due to higher oil prices, naira devaluation gains, and savings from subsidy removal — inflows that states could have used to cut debt instead of adding to it.
Rivers State had the highest debt among the 10, standing at N364.39 billion in Q1 2025 — unchanged from Q4 2024 but 56.7% higher than the N232.58 billion recorded a year earlier. Enugu State followed closely with the sharpest percentage jump, more than doubling its debt from N82.48 billion to N188.42 billion, including a N69.14 billion increase in just three months.
Niger State’s debt rose by 67% year-on-year, from N86.07 billion to N143.75 billion. Taraba State more than doubled its debt stock by 154.1%, from N32.64 billion to N82.93 billion. Bauchi State’s debt grew by 31.4% year-on-year, while Benue increased by 11.2%. Gombe saw an 18.1% rise but managed to reduce its debt by N5.58 billion quarter-on-quarter.
Edo State grew its debt by 13.8% year-on-year but posted the sharpest quarterly decline, slashing its debt by N30.6 billion from Q4 2024. Kwara’s debt rose slightly by 1.7% year-on-year, while Nasarawa’s increased by 4.1%, though both states showed modest quarterly changes.
Combined, the 10 states now hold 33.67% of the total N3.87 trillion domestic debt stock of all 36 states and the FCT as of Q1 2025 — up from 21.8% a year earlier. This concentration highlights uneven fiscal behaviour, especially as total domestic debt across all states fell slightly from N4.07 trillion in Q1 2024 to N3.87 trillion in Q1 2025.
Notably, Rivers State’s debt figure for Q1 2025 reflects data as of December 31, 2024, suggesting delays in updates. Meanwhile, the scale of Enugu’s debt growth has raised questions about the projects being financed. Taraba and Niger also posted steep increases that experts say must translate into real development.
Some states showed signs of restraint. Edo and Gombe reduced their debts quarter-on-quarter, with Edo cutting over N30 billion in three months, hinting at improved debt management.
Experts warn that rising debt levels amid improved allocations could pose risks if revenues weaken or interest rates increase. There are concerns that mounting debt servicing could crowd out funds for capital and social spending. States with weak internally generated revenue (IGR) remain particularly vulnerable.
In Q1 2025, seven states spent an average of 190% of their IGR on debt servicing, with a combined debt service bill of N98.71 billion — a 51% jump from the N65.24 billion recorded in Q4 2024.
Teslim Shitta-Bey, Chief Economist at Proshare Nigeria LLC, cautioned that poor balance sheet management by state governments could undermine their fiscal stability. He suggested exploring longer-term, equity-like debt instruments and creating a national asset register to boost capital.
Lagos-based economist Adewale Abimbola said many states remain economically unviable and overly dependent on federal allocations. He urged state governments to identify sectors where they hold competitive advantages, attract investment, and improve the ease of doing business. He also noted that political will, not knowledge, remains the missing link.
Macroeconomic analyst Dayo Adenubi added that states must strengthen IGR by raising consumption levels, improving VAT collection, and enforcing property and transport levies, while ensuring that government delivers on its social contract to maintain taxpayers’ trust.
ADEOLA KUNLE
