Ten Nigerian states have collectively increased their domestic debt by N417.7 billion year-on-year, even as allocations from the Federation Account Allocation Committee (FAAC) have risen sharply. Data from the Debt Management Office (DMO) shows that Rivers, Enugu, Niger, Taraba, Bauchi, Benue, Gombe, Edo, Kwara, and Nasarawa states saw their combined debt stock jump from N884.9 billion in the first quarter of 2024 to N1.3 trillion by the same period in 2025—a 47.2 percent increase.
The DMO’s quarterly reports highlight that, within just three months, these states’ domestic debt grew by N42.3 billion, moving from N1.26 trillion at the end of 2024 to N1.30 trillion in the first quarter of 2025, representing a 3.4 percent quarterly rise.
This borrowing spree has occurred despite improved FAAC disbursements, attributed to higher oil prices, naira devaluation, and the removal of petrol subsidies. Rather than using these increased revenues to reduce debt, several states have opted for additional borrowing. Rivers State leads with a domestic debt stock of N364.39 billion as of Q1 2025, unchanged from the previous quarter but up 56.7 percent year-on-year.
Enugu State’s debt more than doubled, rising from N82.48 billion to N188.42 billion—a 128.4 percent surge. Niger, Taraba, and Bauchi also recorded substantial increases, with Taraba’s debt soaring by 154.1 percent year-on-year.
Some states, such as Edo and Gombe, have shown restraint, reducing their debts on a quarterly basis. Edo, for instance, slashed its debt by over N30 billion in three months.
Experts warn that the failure to reduce debt despite higher allocations could strain state finances, especially if revenue inflows decline or interest rates rise. Concerns have also been raised about states’ growing debt service obligations, which in some cases exceed their internally generated revenue.
Teslim Shitta-Bey, Chief Economist at Proshare Nigeria LLC, cautioned, “The challenge here is that most of the governments, including the Federal Government, are unable to manage their balance sheets properly. While borrowing might seem like an easy way to run operations, it is not necessarily the right approach.” He advocates for longer-term debt structures and a comprehensive register of national assets to help states raise capital.
Economist Adewale Abimbola has attributed the fiscal fragility of many states to overreliance on federal allocations, urging them to develop competitive sectors and improve the ease of doing business. Macroeconomic analyst Dayo Adenubi also emphasized the need for states to boost internally generated revenue and enhance tax collection.
Okay.ng reports that, as of Q1 2025, the ten states’ combined domestic debt accounted for 33.67 percent of the total domestic debt of all 36 states and the FCT, up from 21.8 percent a year earlier. This concentration of borrowing raises questions about fiscal discipline and sustainability at the subnational level.
