Ten States Increase Domestic Debt By N417.7bn Despite Revenue Boost

Despite a significant increase in revenue allocations from the Federation Account Allocation Committee (FAAC), at least ten Nigerian states collectively grew their domestic debt stock by over N417.7bn in one year, official records have revealed.

An analysis of subnational debt reports from the Debt Management Office (DMO) showed that Rivers, Enugu, Niger, Taraba, Bauchi, Benue, Gombe, Edo, Kwara, and Nasarawa states raised their total domestic debt from N884.9bn in Q1 2024 to N1.3tn in Q1 2025—a 47.2 per cent increase year-on-year.

Quarter-on-quarter, the same ten states added N42.3bn to their debt portfolio, growing from N1.26tn in Q4 2024 to N1.30tn in Q1 2025—a 3.4 per cent rise in just three months.

This trend comes even as FAAC disbursements have improved, buoyed by rising oil prices, gains from naira devaluation, and funds saved from the removal of petrol subsidies. Yet, rather than using these inflows to reduce debt burdens, many states appear to have borrowed even more.

Rivers State Leads The Chart

Rivers State recorded the highest debt among the group with N364.39bn in domestic debt as of Q1 2025—unchanged from Q4 2024, but a year-on-year increase of N131.82bn (56.7 per cent) compared to N232.58bn in Q1 2024.

Enugu State followed with a dramatic rise from N82.48bn to N188.42bn, indicating a 128.4 per cent jump. Enugu also posted the largest quarter-on-quarter increase, adding N69.14bn in just three months.

Niger State’s debt rose from N86.07bn to N143.75bn year-on-year, up by N57.68bn (67 per cent), while Taraba State more than doubled its debt from N32.64bn to N82.93bn, recording a 154.1 per cent increase.

Bauchi State grew its debt stock by N34.01bn (31.4 per cent) year-on-year, from N108.39bn to N142.40bn, though it recorded a slight quarterly decline of N1.55bn.

Benue State also posted a yearly increase of N13.09bn, rising from N116.73bn to N129.82bn. Between Q4 2024 and Q1 2025 alone, Benue added N7.25bn.

Gombe saw its debt grow by N12.85bn (18.1 per cent) from N70.81bn to N83.66bn, but the state reduced its debt from N89.24bn in the previous quarter, indicating a N5.58bn quarterly decline.

Edo’s debt increased by N10.02bn year-on-year to N82.40bn, although it recorded the steepest quarterly drop—reducing its debt by N30.60bn from N113bn in Q4 2024.

Kwara’s domestic debt grew modestly by N1.03bn, from N59.07bn to N60.10bn. Nasarawa State’s debt also rose slightly by N968m to N24.73bn, though it declined by N1.87bn from Q4 2024.

Ten States Hold One-Third Of National Debt

Collectively, these ten states now account for N1.30tn—33.67 per cent of Nigeria’s total subnational domestic debt of N3.87tn as of Q1 2025. This marks a significant jump from Q1 2024, when they owed just N884.9bn and made up only 21.8 per cent of the national debt stock. Their share in Q4 2024 stood at 31.8 per cent.

The figures highlight growing debt concentration among a few states, even though total subnational debt across all 36 states and the FCT declined slightly from N4.07tn in Q1 2024 to N3.87tn in Q1 2025.

However, DMO clarified that Rivers State’s Q1 2025 debt was as of December 31, 2024, while the Q1 2024 figure was dated March 31, 2023—explaining the apparent surge and indicating delays in updating figures.

Debt Service Outpaces Revenue

The rise in debt obligations has triggered concerns over future fiscal stability. Several states now spend more servicing debt than they earn internally. Earlier data showed that seven states—Bayelsa, Adamawa, Benue, Niger, Kogi, Taraba, and Bauchi—spent an average of 190 per cent of their Internally Generated Revenue (IGR) on debt servicing in Q1 2025.

These seven states spent a total of N98.71bn on debt servicing in Q1 2025—a 51 per cent increase from the N65.24bn recorded in Q4 2024.

Experts Raise Concerns

Director and Chief Economist at Proshare Nigeria LLC, Teslim Shitta-Bey, warned that poor debt management could threaten fiscal stability in the long run.

“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 said.

He recommended that states focus on longer-term financial structures and asset-backed financing.

“Governments could consider longer-term debt structures that resemble equity, which might actually be more beneficial in the long run,” he added.

Shitta-Bey also called for the revitalization of state-backed revenue bonds and a national asset register to support capital generation, stressing the need for more responsible borrowing across all tiers of government.