‘States’ debt service obligations threaten economic stability’

A recent NEITI Policy Brief has raised concerns about the debt servicing obligations of Nigerian states, highlighting the strain it puts on their ability to fund essential services and infrastructure projects. The report reveals that many states have a significant portion of their monthly FAAC allocation directly deducted for debt servicing, leaving limited resources for development.

The total public debt in Nigeria has increased to N38 trillion in the first quarter of 2025, with the federal government accounting for the bulk. Despite some reduction in domestic debt owed by states, the NEITI report indicates that debt levels are still high, impacting their capacity to optimize allocations.

The Policy Brief also identifies states with high debt burdens like Kaduna and Ogun, contrasting them with better performers like Borno and Jigawa. NEITI emphasizes the need for prudent borrowing and transparent debt management to ensure economic stability and sustainable development.

The report calls for increased fiscal discipline, strategic borrowing, and careful consideration of contractual terms to avoid future financial risks. NEITI.