Despite receiving higher allocations from the Federation Account Allocation Committee (FAAC), ten Nigerian states borrowed a combined ₦417 billion in the first quarter of 2025, raising concerns over fiscal irresponsibility. Experts warn this trend may undermine financial stability—especially if future revenues decline or interest rates rise.
Analysis of Q1 2025 data highlights a worrying surge: seven states—including Bayelsa, Adamawa, Benue, Niger, Kogi, Taraba, and Bauchi—spent an average of 190% of their internally generated revenue (IGR) on servicing debt, with some exceeding 300%. State debt servicing jumped 51% quarter-on-quarter, soaring to ₦98.71 bn, up from ₦65.24 bn in Q4 2024 .
Economist Teslim Shitta‑Bey of Proshare Nigeria cautioned that many state budgets, like the federal government’s, are structurally weak, relying excessively on short-term borrowing to fund operations. He urged a move toward long-term, equity-like financing and better utilization of asset-backed revenue bonds rather than defaulting to general loans . He also advocated for the establishment of a comprehensive national assets register to bolster capital-raising efforts—citing examples like the rarely used National Stadium.
Experts are particularly wary of the “crowding-out” effect: as debt-servicing claims an increasing share of monthly allocations, fewer resources remain for capital projects and social programmes . This is especially true in states with low IGR—which depend heavily on FAAC—where debt obligations are consuming growing portions of their budgets, leaving little funding for development.
