Despite a surge in revenue allocations from the Federation Account Allocation Committee (FAAC), at least 10 Nigerian states have collectively increased their domestic debt burden by a staggering ₦417.7 billion in just one year a move critics say reflects chronic fiscal irresponsibility, political self-interest, and systemic corruption.
Data from the Debt Management Office (DMO) show that the domestic debt of Rivers, Enugu, Niger, Taraba, Bauchi, Benue, Gombe, Edo, Kwara, and Nasarawa States ballooned from ₦884.9 billion in Q1 2024 to ₦1.30 trillion in Q1 2025, a 47.2% year-on-year increase, despite the windfall from oil revenues, subsidy removal, and naira devaluation.
While the federal government and its agencies have touted higher allocations as a chance for states to pursue fiscal stability and development, many state governors appear more focused on expanding political war chests, awarding inflated contracts, and pursuing white elephant projects, with little accountability.
Debt-Fueled Waste, Not Development
Leading the pack is Rivers State, with a domestic debt stock of ₦364.39 billion, the highest among the 10. The figure has remained unchanged quarter-on-quarter, but compared to Q1 2024’s ₦232.58 billion, the state added ₦131.82 billion in new debt—a 56.7% jump. The fact that Rivers has failed to release its most recent debt data beyond December 2024 raises transparency concerns, reinforcing allegations that the state operates in fiscal secrecy.
Enugu State, however, posted the most dramatic increase, more than doubling its domestic debt from ₦82.48 billion to ₦188.42 billion in just one year a rise of 128.4%. A staggering ₦69.14 billion was added within just one quarter, prompting questions about where the money is going and who is benefiting.
In Taraba State, the domestic debt rose from ₦32.64 billion to ₦82.93 billion, representing a 154.1% increase the steepest among all states reviewed. Yet, there are few visible projects to justify such aggressive borrowing, with most of the state’s infrastructure still in decay and workers frequently protesting unpaid wages.
Niger State followed with a ₦57.68 billion increase, raising doubts about the quality of fiscal management and the sincerity of its developmental agenda.
While some states such as Edo and Gombe recorded a modest reduction in debt quarter-on-quarter, the overall picture remains bleak. The ₦1.30 trillion owed by these 10 states now represents 33.67% of the ₦3.87 trillion total domestic debt owed by Nigeria’s 36 states and the FCT a massive jump from 21.8% in Q1 2024.
Political Priorities Over People’s Needs
Analysts warn that the current debt trajectory is being driven not by a sincere commitment to development, but by unrestrained political ambitions, patronage networks, and financial indiscipline. Instead of channeling rising allocations toward reducing debt or investing in productive infrastructure, many governors are allegedly diverting funds to prepare for the 2027 elections, enrich loyalists, or engage in reckless contract inflation.
Several states including Benue, Bayelsa, Adamawa, Kogi, Niger, Taraba, and Bauchi spent more than 190% of their Internally Generated Revenue (IGR) on debt servicing in Q1 2025. In some cases, debt servicing alone consumed more than 300% of IGR, a glaring indicator of fiscal mismanagement.
According to budget reports, these seven states spent a combined ₦98.71 billion on debt servicing in Q1 2025, up by 51% from the previous quarter. In essence, many are borrowing not to build, but to repay old loans and keep the political machine oiled.
Experts Warn of Impending Crisis
Economic analysts are sounding the alarm. Teslim Shitta-Bey, Director and Chief Economist at Proshare Nigeria, warned that most states lack any coherent financial management strategy. “They are unable to manage their balance sheets properly. Borrowing has become the lazy man’s option,” he said.
Rather than seeking out alternative funding through revenue bonds or asset monetisation, states are stuck in a cycle of short-term borrowing and long-term suffering, he added. Many state assets remain underutilised or rotting, such as stadia, industrial parks, and transportation hubs, while governors chase new loans.
Lagos-based economist Adewale Abimbola was even more damning. He said many states are economically non-viable, kept alive only by monthly FAAC injections. “They know what to do,” he said. “They just lack the political will. Corruption and self-preservation are the only real policies in many statehouses today.”
He urged state governments to identify their unique economic strengths, create investor-friendly environments, and move away from the “beggar mentality” that has defined Nigeria’s federated system for decades.
A Governance Deficit
As Nigeria faces increasing economic pressure rising inflation, unemployment, and a weakening naira the failure of state governments to adopt disciplined financial practices could further destabilise the federation.
Unfortunately, many governors appear more preoccupied with political positioning than long-term planning. From ghost projects to padded contracts, opaque procurement practices, and bloated payrolls filled with political loyalists, the signs of elite capture of public finance are everywhere.
Citizens bear the brunt: poor healthcare, collapsing education systems, and stalled infrastructure projects even as their leaders take on more debt in their names.
Unless transparency improves and the political class is held accountable, Nigeria may find itself hurtling toward a subnational debt crisis that will leave states both broke and broken.
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