Nigeria’s State Debts Reach N11.47tn Amid Rising Allocations
As of June 30, 2024, the total debt of Nigerian states has climbed to N11.47 trillion, a significant rise despite higher allocations from the Federation Account Allocation Committee (FAAC). This marks a 14.57% increase from N10.01 trillion in December 2023, according to data from the Debt Management Office (DMO).
The rise in debt is primarily attributed to a sharp increase in external borrowing, worsened by the devaluation of the naira. External debt for the states and the Federal Capital Territory (FCT) grew from $4.61 billion to $4.89 billion, representing a 6.14% increase. In naira terms, however, this growth was much more dramatic, rising by 73.46% from N4.15 trillion to N7.2 trillion due to the naira’s depreciation, which saw it drop from N899.39 to N1,470.19 per dollar.
On the other hand, domestic debt for the states and FCT dropped by 27.12%, from N5.86 trillion to N4.27 trillion. There was also a slight increase of 4.91% between March and June 2024, suggesting that state debt is once again on the rise after a brief decline earlier in the year.
States and the FCT now account for 8.54% of Nigeria’s total public debt, which stood at N134.3 trillion as of June 2024, down from 10.29% in December 2023. This increase in nominal debt, however, occurred against the backdrop of rising FAAC receipts, which have been buoyed by higher oil prices and foreign exchange gains.
In the second quarter of 2024, the FAAC disbursed N3.47 trillion to the three tiers of government, marking a 1.42% increase from the first quarter. Of this, the Federal Government received N1.1 trillion, while states shared N1.34 trillion, and local governments received N865 billion. Nine oil-producing states also received N169.26 billion in derivation payments.
State-by-state allocation figures show that Delta State received the largest share, with N137.36 billion, followed by Lagos at N123.28 billion and Rivers at N108.10 billion. States like Nasarawa, Ebonyi, and Ekiti received the least, with allocations around N25 billion.
In terms of state debt, Rivers State recorded the highest percentage increase, with its debt rising by 67%, from N232.58 billion to N389.20 billion. Other states like Taraba, Niger, and Katsina also saw substantial increases. In contrast, Lagos State, the highest debtor among the states, reduced its debt stock by 5%.
While some states such as Delta, Bayelsa, and Ebonyi managed to reduce their debt levels, others like Rivers and Borno experienced sharp rises. Lagos continues to lead in external debt, although it saw a slight decrease from $1.24 billion in December 2023 to $1.20 billion in June 2024.
The surge in state debts has raised concerns about fiscal sustainability, especially given that debt servicing is consuming a significant portion of states’ revenues. In the first half of 2024, 29 state governments spent 80.7% of their internally generated revenue (IGR) on debt servicing. Economists have warned that such high debt levels may hamper economic development at the subnational level and make it more difficult for states to improve the living conditions of their residents.
Experts also pointed out that excessive borrowing, particularly for non-productive projects, is unsustainable and could further burden future generations. The Fiscal Responsibility Commission has raised alarms over the lack of accountability and transparency in state-level financial management, warning that Nigeria’s fiscal federalism may be at risk of becoming unsustainable in its current form.
