Ten Nigerian states have collectively increased their domestic debt by N417.7 billion year-on-year, despite receiving higher revenue allocations from the Federation Account Allocation Committee.
The states involved are Rivers, Enugu, Niger, Taraba, Bauchi, Benue, Gombe, Edo, Kwara, and Nasarawa.
States with the Highest Debt Increase are Rivers State: N364.39 billion, representing a 56.7% year-on-year increase, Enugu State: N188.42 billion, representing a 128.4% year-on-year increase, Taraba State: N82.93 billion, representing a 154.1% year-on-year increase.
Experts warn that the rising debt burden could challenge the fiscal stability of these states in the coming years, especially if revenue inflows weaken or interest rates rise.
Some states are struggling to service their debts, with seven states spending an average of 190% of their Internally Generated Revenue on debt servicing in Q1 2025.
The sustainability of borrowing at the state level is being questioned. States need to effectively manage their balance sheets and explore alternative funding options.
States should focus on boosting internally generated revenue to reduce dependence on federal allocations
To mitigate these challenges, experts recommend that these states need to boost internally generated revenue through tax collection and other means.
Adopt supportive policies and avoid stifling regulations to attract investment.
Consider longer-term debt structures and revenue bonds instead of general obligation bonds.
