Seven Nigerian states have spent an average of 190 percent of their Internally Generated Revenue (IGR) on debt servicing in the first quarter of 2025, according to recent budget implementation reports. This sharp rise signals escalating fiscal pressures confronting subnational governments.
The states—Bayelsa, Adamawa, Benue, Niger, Kogi, Taraba, and Bauchi—collectively spent N98.71 billion on debt repayment between January and March 2025. This figure marks a 51 percent increase from the N65.24 billion recorded in the final quarter of 2024, despite only a modest 18 percent growth in their combined IGR from N44.05 billion to N51.92 billion.
Debt servicing costs in these states significantly outpaced their internally generated revenues, with some states spending more than triple their IGR on repayments. For instance, Benue State’s debt service expenditure soared to 413 percent of its IGR, while Kogi State spent 248 percent of its IGR on debt repayment.
The fiscal strain has forced these states to rely heavily on federal allocations from the Federation Account Allocation Committee (FAAC), which rose from N360.75 billion in Q4 2024 to N419.86 billion in Q1 2025. The states required nearly N46.80 billion—over 11 percent of their total FAAC inflows—to cover the shortfall between revenue and debt obligations.
State-specific figures reveal the extent of the problem:
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Benue State: Debt service jumped from N1.99 billion to N21.40 billion while IGR rose from N1.98 billion to N5.18 billion. The state used N16.22 billion from its FAAC allocation of N58.71 billion to fill the gap.
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Kogi State: With an IGR of N9.63 billion, the state spent N23.88 billion on debt servicing in Q1, accounting for 21.7 percent of its total expenditure. Kogi has reportedly cleared N98.8 billion of inherited debt since the current administration took office 15 months ago.
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Adamawa State: Generated N4.07 billion internally but spent N8.42 billion on debt, requiring N4.35 billion from its FAAC share of N37.03 billion.
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Bayelsa State: Spent N13.55 billion on debt repayment, exceeding its IGR of N12.55 billion, with debt service accounting for 6.1 percent of total expenditure.
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Niger State: Used 102.4 percent of its IGR for debt servicing, requiring additional FAAC support to meet obligations.
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Taraba State: Spent 232 percent of IGR on debt, heavily reliant on FAAC disbursements.
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Bauchi State: Debt repayments amounted to 225 percent of IGR, consuming over 11 percent of total expenditure.
Experts warn that such rising debt servicing costs risk crowding out developmental spending at the state level and increasing dependence on federal allocations. The National Orientation Agency has noted that recent federal policies, such as the removal of petrol subsidies and currency adjustments, have improved federal inflows to states, but fiscal sustainability remains a concern.
The states’ medium-term fiscal frameworks indicate that eight states will collectively pay N424.28 billion in debt service and borrow N1.21 trillion between 2025 and 2026. This growing debt burden is poised to challenge subnational fiscal stability, as highlighted by economists like Teslim Shitta-Bey of Proshare Nigeria LLC.
The data underscores the urgent need for sustainable fiscal management and reform to ensure that states can balance debt obligations while meeting critical development needs.
