A new report by BudgIT has revealed that states across Nigeria owe contractors and retirees a combined N1.06tn, even though they received record-high revenue allocations in 2024. The figures, contained in the organisation’s 2025 State of States report, highlight the growing financial pressure at the subnational level.
According to the data, contractor arrears stood at N434.87bn, while pension and gratuity liabilities amounted to N626.81bn. The total burden underscores the difficulty many states face in balancing recurrent spending with long-standing financial obligations. The report showed that 30 states owed either contractors or pensioners during the 2024 fiscal year, as 26 states reported contractor arrears and 27 states owed pension and gratuity backlogs.
Only Borno, Kano, and Nasarawa did not report any arrears in both categories, making them the only states with no outstanding obligations that year. Kaduna State was identified as the highest debtor, with a combined liability of N139.36bn. The state owed contractors N56.07bn and had pension arrears of N83.29bn, the largest pension backlog nationwide.
Ogun followed with N107.18bn in combined arrears, mainly from its N81.54bn pension backlog and N25.64bn owed to contractors. Benue ranked third with N99.68bn in outstanding liabilities, including N27.42bn owed to contractors and N72.25bn in pension arrears. Edo State recorded N95.46bn, made up of N37.54bn in contractor arrears and N57.92bn in pensions.
Enugu was next with N90.18bn in combined arrears, split between N54bn owed to contractors and N36.18bn in unpaid pensions. Other states with high arrears included Imo with N57.25bn, Akwa Ibom with N43.71bn, Delta with N42.35bn, Oyo with N41.97bn, and Plateau with N40.98bn. These 10 states accounted for nearly half of the N1.06tn owed nationwide.
At the lower end of the table, Kano and Nasarawa owed nothing, while Lagos owed only N48.74m in contractor arrears and no pension backlog, placing it among the least indebted. Ebonyi followed with N88.89m, Borno with N1.10bn, Jigawa with N1.79bn, and Katsina with N2.22bn. Others with small liabilities included Yobe with N3.99bn, Ondo with N4.77bn, and Kogi with N6.52bn.
The report also highlighted that total liabilities for 35 states analysed—excluding Rivers State—stood at N1.24tn. Rivers was exempted because the state did not produce an audited financial statement for 2024, and a Federal High Court had earlier nullified its 2024 budget.
Besides contractor and pension arrears, states also owed N33.74bn in salary and staff claims, N62.33bn in judgment debts, and N73.25bn in other liabilities. BudgIT warned that if left unresolved, these arrears could weaken fiscal sustainability, delay capital projects, and reduce public trust, especially among retired workers depending on their monthly pensions.
The situation is especially concerning because states received unprecedented revenue in 2024. FAAC allocations rose sharply to N11.38tn, compared to N5.4tn in 2023. The increase was driven by the removal of fuel subsidy and changes in the exchange rate. Despite this boost, many states continued to prioritise recurrent spending, leaving pension and contractor arrears largely untouched.
BudgIT noted that some states carried arrears far above their internally generated revenue. Kaduna owed N139.36bn, more than double its IGR of N70.07bn. Benue generated N20.92bn in IGR but owed N99.68bn, nearly five times its revenue. Adamawa generated N20.30bn but owed N27.5bn in pension arrears. Taraba generated N16.06bn but owed N23.53bn, including N23.30bn in pension liabilities.
These figures show a widening gap between revenue capacity and expenditure commitments, especially in states with long-standing pension issues. Pension experts also note that the failure of many states to fully adopt the Contributory Pension Scheme has contributed to this challenge.
According to the National Pension Commission, only 17 states currently implement the CPS, while 12 states have not started at all and seven are still at various stages of setting up their pension bureaus. The CPS, introduced by the Pension Reform Act of 2004 and strengthened in 2014, requires both employers and employees to jointly contribute to a worker’s retirement savings.
Speaking earlier with The PUNCH, the spokesperson for the Nigerian Union of Pensioners, Bunmi Ogunkolade, said many state governments have been slow in addressing pension backlogs and implementing the new pension system. He urged governments to prioritise retirees’ entitlements.
Earlier this month, national contractors, lawyers, and activists staged a protest at the National Assembly over alleged N3tn owed by the Federal Government. The demonstrators blocked the entry and exit points of the complex, insisting they would not leave until payments were made. The President of the All Indigenous Contractors Association of Nigeria, Jackson Nwosu, said the protest became necessary because several promises had been broken and contractors had been waiting for years for their payments.
