10 Nigerian States Add N417.7bn to Domestic Debt Despite Higher FAAC Revenues

 At least ten Nigerian states collectively increased their domestic debt burden by a staggering N417.7 billion year-on-year, despite significant growth in revenue allocations from the Federation Account Allocation Committee (FAAC), an analysis of official data has revealed.

A review of quarterly reports from the Debt Management Office (DMO) shows that Rivers, Enugu, Niger, Taraba, Bauchi, Benue, Gombe, Edo, Kwara, and Nasarawa States raised their combined domestic debt stock from N884.9 billion in the first quarter of 2024 to N1.3 trillion in the first quarter of 2025.

This represents a sharp 47.2 per cent increase in just one year, intensifying concerns about fiscal prudence and the sustainability of subnational borrowing amid Nigeria’s broader economic challenges.

Notably, the surge in debt occurred alongside improved FAAC disbursements to states, driven by higher oil prices, gains from naira devaluation, and savings realised from the removal of petrol subsidies. However, the data suggests that rather than leveraging these revenue inflows to reduce their debt exposure, some states opted to accumulate even more domestic debt.

Rivers State Tops the Chart

Rivers State emerged with the highest domestic debt stock among the ten states, standing at N364.39 billion as of Q1 2025. Although this figure remained unchanged from Q4 2024, it marked a significant year-on-year rise of N131.82 billion, representing a 56.7 per cent increase from N232.58 billion recorded in Q1 2024.

Enugu Records Highest Percentage Growth

Enugu State recorded the most dramatic growth in both absolute and percentage terms. Its domestic debt soared from N82.48 billion in Q1 2024 to N188.42 billion in Q1 2025—an increase of N105.95 billion, or 128.4 per cent. Enugu also posted the largest quarter-on-quarter growth, with its debt stock surging by N69.14 billion between December 2024 and March 2025 alone.

Other Significant Increases

Niger State followed closely, expanding its debt portfolio from N86.07 billion in Q1 2024 to N143.75 billion in Q1 2025—a year-on-year rise of N57.68 billion, equivalent to a 67 per cent increase. The state’s debt also grew by N3.02 billion on a quarter-on-quarter basis.

Taraba State more than doubled its domestic debt, increasing from N32.64 billion to N82.93 billion, a year-on-year spike of N50.29 billion or 154.1 per cent. The state also recorded a modest quarterly increase of N1.54 billion.

Bauchi State’s debt rose from N108.39 billion to N142.40 billion year-on-year, translating to a rise of N34.01 billion, or 31.4 per cent. However, Bauchi saw a slight quarterly decline of N1.55 billion.

Benue State’s domestic debt grew from N116.73 billion to N129.82 billion, a year-on-year increase of N13.09 billion or 11.2 per cent, with a quarterly rise of N7.25 billion.

Gombe State’s debt rose by N12.85 billion, moving from N70.81 billion to N83.66 billion year-on-year, marking an 18.1 per cent increase. Interestingly, Gombe managed to reduce its debt quarter-on-quarter, falling by N5.58 billion from Q4 2024.

Edo State increased its domestic debt from N72.38 billion in Q1 2024 to N82.40 billion in Q1 2025, up by N10.02 billion or 13.8 per cent. However, Edo posted the sharpest quarterly reduction among the group, slashing its debt by N30.60 billion from the N113 billion reported in Q4 2024.

Kwara State’s debt grew modestly from N59.07 billion to N60.10 billion, a year-on-year increase of N1.03 billion or 1.7 per cent. Its quarterly debt rose by N1.02 billion.

Nasarawa State saw its domestic debt edge upward from N23.76 billion to N24.73 billion, representing a year-on-year increase of N968 million or 4.1 per cent. Yet, Nasarawa recorded a quarterly decline of N1.87 billion.

Concentration of Subnational Borrowing

Overall, the combined domestic debt of these ten states accounted for 33.67 per cent of the total N3.87 trillion domestic debt owed by Nigeria’s 36 states and the Federal Capital Territory (FCT) as of Q1 2025. This marks a significant jump from the N884.9 billion recorded by the same ten states in Q1 2024, when they represented only 21.8 per cent of the national subnational debt stock.

Interestingly, 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 rising share of debt held by these ten states points to increasingly uneven fiscal dynamics within Nigeria’s federation.

However, it is important to note that Rivers State’s Q1 2025 debt figure is based on data as of December 31, 2024, rather than the end of March 2025. The DMO clarified in its report: “The Domestic Debt Stock for Rivers State was as at December 31, 2024.” This timing gap partly explains the significant year-on-year increase reported for the state and highlights delays in debt reporting practices at the subnational level.

As Nigeria continues to grapple with fiscal sustainability, the debt trajectories of its states remain under close scrutiny, especially as rising debt service costs threaten to crowd out crucial development spending across the country.