Despite increased revenue from the Federation Account Allocation Committee (FAAC), at least 10 Nigerian states increased their domestic debt stock by ₦417.7 billion between Q1 2024 and Q1 2025, raising fiscal sustainability concerns.
A comprehensive review of quarterly data from the Debt Management Office (DMO) reveals that Rivers, Enugu, Niger, Taraba, Bauchi, Benue, Gombe, Edo, Kwara, and Nasarawa States collectively raised their domestic debt from ₦884.9bn in Q1 2024 to ₦1.30tn in Q1 2025, a 47.2% year-on-year increase.
Quarter-on-quarter, their combined debt rose by ₦42.3bn or 3.4% between Q4 2024 and Q1 2025, despite a national rise in oil revenues, naira devaluation gains, and savings from fuel subsidy removal.
Rivers State reported the highest domestic debt at ₦364.39bn in Q1 2025, up from ₦232.58bn in Q1 2024, a 56.7% jump. While this figure remained unchanged from the previous quarter, the data was as of December 2024, indicating potential delays in updates.
Enugu State recorded the largest year-on-year increase in percentage terms, up by 128.4% from ₦82.48bn to ₦188.42bn, including a quarterly surge of ₦69.14bn. Taraba State followed with a 154.1% rise, from ₦32.64bn to ₦82.93bn year-on-year.
Niger State’s debt rose by ₦57.68bn, from ₦86.07bn to ₦143.75bn, while Bauchi State’s debt increased to ₦142.40bn from ₦108.39bn year-on-year, although it posted a slight quarterly decline.
Benue State’s debt rose to ₦129.82bn, up by 11.2%. Gombe, Edo, Kwara, and Nasarawa also posted increases ranging from ₦968 million to ₦12.85bn.
Combined, these 10 states now account for 33.67% of Nigeria’s total subnational domestic debt, compared to 21.8% a year earlier.
This debt concentration has raised fiscal alarm bells. While Nigeria’s total domestic debt for all states and the FCT slightly fell to ₦3.87tn in Q1 2025 (from ₦4.07tn in Q1 2024), borrowing in these 10 states surged disproportionately.
Experts argue that instead of leveraging increased FAAC disbursements to reduce liabilities, several states have accelerated borrowing, raising concerns about long-term debt sustainability and the crowding-out of development spending.
Several of these states have weak Internally Generated Revenue (IGR) bases, making them heavily reliant on FAAC. A recent report showed that seven states; Bayelsa, Adamawa, Benue, Niger, Kogi, Taraba, and Bauchi spent an average of 190% of their IGR on debt servicing in Q1 2025.
These Nigerian states collectively spent ₦98.71bn servicing debts in Q1 2025, up by 51% from the ₦65.24bn in Q4 2024, highlighting the deepening fiscal pressure.
Proshare Nigeria’s Chief Economist, Teslim Shitta-Bey, warned that most states are failing to manage their balance sheets effectively. He advised exploring equity-like long-term debt and asset-based capital raising, rather than excessive short-term borrowing.
“The National Stadium, for example, is underutilised and could be commercialised. States should issue revenue bonds tied to income-generating projects instead of depending on general obligation bonds,” he said.
The continued increase in subnational borrowing, especially amid higher federal allocations, underscores the urgent need for better debt transparency, public financial management, and development-focused borrowing strategies.
