Nigerian states are ramping up borrowing despite a sharp increase in allocations from the Federation Account Allocation Committee (FAAC), raising fresh concerns about fiscal sustainability and weak growth in internally generated revenue (IGR).
Recent data show a reversal of the fiscal consolidation trend recorded in 2024.
According to the National Bureau of Statistics (NBS), states’ domestic debt dropped significantly from N5.8 trillion in December 2023 to N3.8 trillion by March 2025.
However, by September 2025, total subnational debt had risen again to N4 trillion.
The largest domestic debt burdens were recorded in Lagos (N1.04 trillion), Rivers (N381 billion), Delta (N247 billion), Enugu (N194.7 billion), and Ogun (N168 billion).
External debt also climbed, increasing from $4.349 billion to $4.811 billion by June 2025, with Lagos leading at $1.049 billion, followed by Kaduna, Edo, Ogun, and Cross River.
This renewed borrowing comes amid a surge in FAAC disbursements since the administration of Bola Tinubu began.
States received N2.80 trillion in 2022, but allocations have since grown by over 160 percent.
Yet, revenue data from Agora Policy highlight a structural weakness. Of the N6.05 trillion generated by 30 states in the first half of 2025, FAAC accounted for 73.8 percent, while IGR contributed just 26.2 percent.
Notably, 29 states derived between 70 and 95 percent of revenues from FAAC, with Lagos the only outlier at 30 percent.
The trend underscores persistent fiscal dependence on federal transfers, limiting long-term resilience.
