By Abigail Philip David
The combined debt of Nigerian states rose to N11.47 trillion as of June 2024, reflecting a 14.57% increase from the N10.01 trillion recorded in December 2023, according to an analysis of recent public debt data from the Debt Management Office. This rise occurred despite higher allocations from the Federation Account Allocation Committee (FAAC).
The increase was mainly driven by a sharp rise in external debt, worsened by the naira’s devaluation. External debt for states and the Federal Capital Territory (FCT) rose by 6.14%, from $4.61 billion to $4.89 billion. In naira terms, however, this figure surged by 73.46%, from N4.15 trillion to N7.2 trillion, as the naira fell from N899.39/$1 in December 2023 to N1,470.19/$1 by June 2024. Meanwhile, domestic debt for states and the FCT decreased by 27.12%, from N5.86 trillion to N4.27 trillion.
In total, state and FCT debt accounted for 8.54% of Nigeria’s N134.3 trillion public debt by June 2024, down from 10.29% in December 2023, even as their nominal debt increased. Nigeria’s overall debt stock rose by N12.6 trillion in the second quarter of 2024 to reach N134.3 trillion ($91.3 billion), a 10.35% increase from the previous quarter.
Increased FAAC allocations helped cushion some of the debt pressures. The Nigeria Extractive Industries Transparency Initiative recently reported that FAAC disbursed N3.473 trillion to the three tiers of government in Q2 2024, up by 1.42% from the first quarter. The federal government received N1.102 trillion (33.35%), states N1.337 trillion (40.47%), and local councils N864.98 billion (26.18%), with nine oil-producing states receiving an additional N169.26 billion in derivation funds.
Debt Variations Across States
Delta, Lagos, and Rivers received the largest state allocations in Q2, with N137.36 billion, N123.28 billion, and N108.104 billion, respectively. Nasarawa, Ebonyi, and Ekiti received the least, each receiving just over N24 billion. Meanwhile, Rivers saw the highest debt increase, rising by 67% from N232.58 billion in March to N389.20 billion in June. Taraba and Niger also reported significant debt growth, with increases of 160% and 70%, respectively.
However, some states managed to reduce their debt burdens. Lagos, for instance, reduced its domestic debt by 5%, from N929.41 billion in March to N885.99 billion in June. Delta, Bayelsa, and Ebonyi also recorded notable debt reductions of 9%, 6%, and 9%, respectively.
Rising Debt Amid Economic Challenges
The devaluation of the naira has impacted Nigeria’s total debt profile, pushing up external obligations in naira terms even with modest new borrowings. Economist Paul Alaje warns that high debt servicing costs could hinder states’ ability to achieve sustainable development and economic growth. Additionally, former Chartered Institute of Bankers President Segun Ajibola recently highlighted that high governance costs, combined with poor oversight at the state level, yield minimal benefits for local economies.
The Fiscal Responsibility Commission raised further concerns last week, cautioning that Nigeria’s fiscal structure, which allows significant autonomy in state financial management, could become unsustainable without stronger accountability mechanisms.
