Thirty-six states and the Federal Capital Territory (FCT) accumulated a total debt stock of N10 trillion, representing a 38.1 percent increase from N7.25 trillion recorded in 2022, according to a report issued by BudgIT.
BudgIT, a prime civic-tech organisation leading the advocacy for fiscal transparency and accountability in Nigeria, in its 2024 edition of its ‘State of States Report,’ noted that the growth in debt profile was partly driven by a N606.12 billion increase in domestic debt, resulting in an average year-on-year growth rate of 11.4 percent.
“By December 31, 2023, the total domestic debt stood at N5.86tn. The situation was further complicated by rising foreign debt, which increased by 4.1%, from $4.43bn in 2022 to $4.61bn in 2023. The liberalisation of the exchange rate exacerbated the financial strain on states, significantly raising their foreign loan repayment obligations in Naira terms,” the firm noted in a statement issued on Tuesday.
The report showed that Lagos remains the most indebted state in foreign currency, accounting for 26.9 percent of the total foreign debt, equivalent to $1.24 billion. Further analysis of the debt landscape revealed a considerable variance of N2.74 trillion in debt repayment obligations when comparing the exchange rate movement from N899.39 per dollar as of December 31, 2023, to the new rate of N1,492.9 as of June 2024.
The devaluation exposed many states to heightened financial risk, particularly the eight states where more than 50 percent of the total debt is dollar-denominated. Kaduna and Edo have the highest foreign debt-to-total debt ratios, at 86.06 percent and 60.54 percent, respectively. The other states in this group—Ondo, Bauchi, Lagos, Enugu, Ebonyi, and Anambra—have ratios ranging from 50 percent to 59 percent.
The debt burden also varied significantly across the country, with the average subnational debt per capita reaching N40,469 in 2023. Twelve states exceeded this benchmark, with Lagos having the highest debt per capita at N138,034.
In addition to the existing debt stock, the states have existing liabilities totalling N1.19trillion: N408.69billion is owed in contractor arrears, N521.36billion is owed in pension.
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and gratuity arrears, N79.64billion is owed in salary and other staff claims, N4.36bn is owed in judgement debt and other pending litigation, with other payables and liabilities amounting to N182.79bn.
“The fiscal viability and long-term sustainability of states heavily depend on their capacity to mobilise revenues internally by effectively leveraging their natural resource endowments, technology, public-private partnerships, human capital, and effective consequence management.
” This capacity is crucial for financing essential infrastructure, investing in human capital development and social protection, meeting the new minimum wage and its consequential adjustments, and repairing the fractured social contract.
“To achieve debt sustainability, states must also curb their reliance on foreign loans, especially in light of exchange rate volatility and shrinking fiscal space, to minimise exposure to unfavourable exchange rates.
Additionally, states should establish robust frameworks for debt transparency and accountability ensuring that borrowed funds are allocated to high-impact projects with clear economic returns,” said
Iniobong Usen, head of Research and Policy Advisory, BudgIT.
