At least ten Nigerian states have collectively raised their domestic debt stock by ₦417.7 billion within a year, despite receiving increased monthly revenue from the Federation Account Allocation Committee (FAAC), new data from the Debt Management Office (DMO) has shown.
A breakdown of DMO’s subnational debt reports reveals that Rivers, Enugu, Niger, Taraba, Bauchi, Benue, Gombe, Edo, Kwara, and Nasarawa States increased their total domestic debt from ₦884.9bn in Q1 2024 to ₦1.3tn in Q1 2025, representing a 47.2% rise year-on-year. The same group of states also recorded a quarterly increase of ₦42.3bn, climbing from ₦1.26tn in Q4 2024.
This surge in borrowing has raised concerns about fiscal discipline and long-term debt sustainability, especially given the significant boost in revenue attributed to higher crude oil prices, the removal of petrol subsidies, and naira devaluation.
Rivers State leads with the largest domestic debt stock of ₦364.39bn as of Q1 2025. Though unchanged from Q4 2024, this marks a 56.7% rise from ₦232.58bn in Q1 2024. However, it is worth noting that the Q1 2025 figure for Rivers is based on December 2024 data, indicating possible delays in updated reporting.
Enugu State posted the highest percentage increase, more than doubling its debt from ₦82.48bn to ₦188.42bn — a rise of 128.4% year-on-year, and the highest quarterly growth of ₦69.14bn within just three months.
Niger State grew its debt from ₦86.07bn to ₦143.75bn, a 67% jump, while Taraba State‘s debt more than doubled from ₦32.64bn to ₦82.93bn, a massive 154.1% increase, the highest among the 10 states.
Other states also recorded notable increases:
- Bauchi: ₦108.39bn to ₦142.40bn (31.4%)
- Benue: ₦116.73bn to ₦129.82bn (11.2%)
- Gombe: ₦70.81bn to ₦83.66bn (18.1%)
- Edo: ₦72.38bn to ₦82.40bn (13.8%)
- Kwara: ₦59.07bn to ₦60.10bn (1.7%)
- Nasarawa: ₦23.76bn to ₦24.73bn (4.1%)
In contrast, Edo State recorded the largest quarterly drop among the group, slashing debt from ₦113bn in Q4 2024 to ₦82.40bn, possibly due to aggressive repayments or improved fiscal strategies. Gombe and Nasarawa also recorded marginal quarter-on-quarter reductions in debt levels.
Altogether, the combined debt of these 10 states now represents 33.67% of the national domestic debt for all 36 states and the Federal Capital Territory (FCT), which stood at ₦3.87tn in Q1 2025. This is up from 21.8% in Q1 2024, showing that domestic borrowing is becoming increasingly concentrated in a few states.
Despite these debt increases, many states have yet to show clear evidence of how the borrowed funds are being used. For example, Enugu and Taraba, which recorded the highest percentage increases, have not provided details on the specific projects being financed.
Meanwhile, fiscal analysts are warning that the continued borrowing could backfire if revenue inflows decline or interest rates rise. Already, debt servicing costs are eating deeper into state revenues. A previous report was revealed that seven states — Bayelsa, Adamawa, Benue, Niger, Kogi, Taraba, and Bauchi — spent an average of 190% of their Internally Generated Revenue (IGR) on debt servicing in Q1 2025.
Collectively, these seven states paid ₦98.71bn to service debt in the first quarter of 2025, a sharp increase of ₦33.48bn (51%) from the ₦65.24bn recorded in Q4 2024.
Teslim Shitta-Bey, Director and Chief Economist at Proshare Nigeria, warned that both federal and state governments are failing to properly manage their balance sheets. He noted that while borrowing is a legitimate tool for development, it must be backed by a sound repayment and investment plan.
“Borrowing should not be the default response to fiscal challenges. States should also consider long-term financial structures and register their assets to raise equity-based capital,” Shitta-Bey advised.
He also lamented the underutilisation of state revenue bonds, which are supposed to fund self-liquidating infrastructure projects but are rarely explored by subnational governments.
On his part, Lagos-based economist Adewale Abimbola attributed the trend to economic non-viability and overreliance on FAAC disbursements. He urged states to leverage their unique competitive advantages to attract private and foreign investments.
“State governors already know what to do. The problem is the lack of political will. Many are already focused on the 2027 elections rather than tackling governance issues,” Abimbola said.
He also emphasized the need for regulatory reforms to improve the ease of doing business and boost internally generated revenue through productive sectors.
Macroeconomic analyst Dayo Adenubi added that one viable path is to increase consumption to expand VAT collections and reduce dependency on federal revenue.
While a few states like Edo and Gombe showed signs of fiscal restraint, the broader trend of rising subnational debt — especially in the face of increasing FAAC allocations — suggests weak discipline in public finance management.
Without structural reforms and a shift toward sustainable financing models, analysts warn that many states risk a debt trap that will undermine their ability to invest in essential infrastructure and services.
