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10 states’ debt burden increases despite higher revenue allocations

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At least 10 Nigerian states have collectively increased their domestic debt by N417.7 billion year-on-year, despite receiving higher revenue allocations from the Federation Account Allocation Committee. The combined debt stock of Rivers, Enugu, Niger, Taraba, Bauchi, Benue, Gombe, Edo, Kwara, and Nasarawa states rose from N884.9 billion in Q1 2024 to N1.3 trillion in Q1 2025, representing a 47.2% increase.

The 10 states’ combined domestic debt increased quarter-on-quarter, from N1.26 trillion in Q4 2024 to N1.30 trillion in Q1 2025, an additional N42.3 billion, representing a 3.4% increase in just three months.

Rivers State topped the list with a domestic debt stock of N364.39 billion as of Q1 2025, the highest among the 10 states. Enugu State’s debt rose from N82.48 billion in Q1 2024 to N188.42 billion in Q1 2025, indicating a rise of N105.95 billion or 128.4%. Taraba State more than doubled its domestic debt from N32.64 billion to N82.93 billion, indicating a year-on-year rise of N50.29 billion or 154.1%.

The increase in debt burden has raised questions about fiscal prudence and the long-term sustainability of borrowing at the state level. The figures show that borrowing at the subnational level is increasingly concentrated in a small number of states. While the total domestic debt across all states and the FCT declined slightly from N4.07 trillion in Q1 2024 to N3.87 trillion in Q1 2025, the increase in the 10 states’ share suggests uneven fiscal behavior.

Experts worry that the failure to take advantage of higher allocations to reduce debt could create challenges in future years, especially if revenue inflows weaken or interest rates rise. States with weak Internally Generated Revenue are particularly at risk, as they depend heavily on FAAC for survival.

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