Despite a 161 percent surge in federal allocations under the Tinubu administration, Nigeria’s 36 states have resumed an aggressive borrowing trend, with aggregate domestic debt rebounding to ₦4 trillion as of September 2025.
Nigeria’s 36 states and the Federal Capital Territory (FCT) have entered a fresh cycle of aggressive borrowing, reversing a year-long trend of fiscal consolidation that had initially seen debt stocks plummet. According to a BusinessDay analysis of National Bureau of Statistics (NBS) data, aggregate domestic debt fell from ₦5.8 trillion in December 2023 to a low of ₦3.8 trillion in March 2025. However, this downward trajectory has been upended, with the total domestic debt profile climbing back to ₦4 trillion by September 2025. On the external front, the situation is equally precarious, with the states’ combined foreign debt rising from $4.349 billion to $4.811 billion as of June 2025, raising urgent questions about long-term fiscal sustainability.
The resurgence of debt comes at a time when states are enjoying record-breaking monthly disbursements from the Federation Account Allocation Committee (FAAC). Under the President Bola Tinubu-led administration, federal allocations have witnessed a meteoric 161 percent increase compared to 2022 levels. While states shared ₦2.80 trillion in 2022, that figure rose to ₦3.53 trillion in 2023, ₦5.27 trillion in 2024, and surged to ₦7.315 trillion in 2025. Despite this massive influx of cash, many sub-national governments appear unable to curb their appetite for credit, with analysts pointing to a stagnant pace of growth in Internally Generated Revenue (IGR) as a primary driver for the continued reliance on loans.
Lagos State continues to dominate the debt landscape, leading both domestic and external categories with ₦1.04 trillion in local debt and $1.049 billion in foreign obligations. Other high-debt states identified as of September 2025 include Rivers (₦381 billion), Delta (₦247 billion), and Enugu (₦194.7 billion). On the external side, Kaduna follows Lagos with $658 million in debt, trailed by Edo at $337 million and Ogun at $214 million. As the aggregate debt profile begins its upward ascent once more, financial observers warn that the window for meaningful fiscal reform is narrowing, particularly if states continue to prioritize borrowing over the expansion of their independent revenue bases.
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