Paragraph 1: Overview of State Debt and Borrowing Projections
Eight Nigerian states – Abia, Adamawa, Bauchi, Borno, Kebbi, Osun, Benue, and Kano – are projected to face substantial financial commitments over the next two years (2025-2026) related to debt servicing and new borrowing. These projections are based on the states’ Medium-Term Fiscal Frameworks (MTEFs), which outline their anticipated budgetary requirements and resource allocation plans. The combined debt service for these eight states is estimated at N424.28 billion over the two-year period, while planned borrowing totals N1.21 trillion. These figures highlight the significant financial challenges these states are expected to encounter, with implications for their fiscal stability and ability to invest in critical development priorities.
Paragraph 2: State-Specific Debt Service and Borrowing Trends
The MTEF analysis reveals diverse patterns in debt service and borrowing across the eight states. Some states anticipate rising debt service obligations, while others aim to reduce borrowing. Adamawa State projects a dramatic 170.56% increase in its debt service from N29.19 billion in 2025 to N78.99 billion in 2026, although it does not plan to borrow further. Bauchi, Borno, and Kebbi also project increased debt service and continued borrowing, albeit at varying levels. In contrast, Kano’s debt service is expected to decrease slightly, and its borrowing is projected to fall significantly. Osun State projects a modest increase in debt service but no new borrowing, while Benue anticipates slightly increased debt service but plans to reduce borrowing. Abia is the only state projecting increases in both debt service and borrowing. These varying trends reflect different fiscal strategies and economic conditions within each state.
Paragraph 3: Expert Analysis on Fiscal Stability and Debt Management
Teslim Shitta-Bey, Director and Chief Economist at Proshare Nigeria LLC, expresses concern about the rising debt burden on subnational governments in Nigeria, warning that it could threaten their fiscal stability. He criticizes both state and federal governments for inadequate balance sheet management and overreliance on borrowing as a default solution. Shitta-Bey advocates for exploring alternative financing mechanisms, such as longer-term debt structures resembling equity, which could offer greater long-term benefits. He also highlights the importance of a national asset register to facilitate capital raising and suggests utilizing underutilized federal assets like the National Stadium to generate revenue.
Paragraph 4: Recommendations for Improved Fiscal Management
Shitta-Bey further recommends a national census of financial assets to enable fundraising through capital markets, emphasizing that borrowing should be purposeful and aligned with long-term investment goals. He criticizes the underutilization of state revenue bonds and encourages states to prioritize these over general obligation bonds. He suggests issuing long-term debt instruments specifically to finance infrastructure projects, arguing that such instruments can be commercially viable and generate returns that contribute to economic growth and address issues like unemployment and insecurity. His overarching message is that debt should be self-financing and investment-oriented to support sustainable economic development.
Paragraph 5: Risks of Rising Debt and the Need for Private Sector Investment
Johnson Chukwu, Group Managing Director of Cowry Asset Management Limited, also voices concerns about Nigeria’s escalating debt profile, warning that it poses substantial risks to the overall economy. He states that burgeoning debt servicing costs are crowding out government resources, limiting funds available for crucial infrastructure development and social services. Chukwu argues that this could hinder the government’s ability to meet the social and infrastructural needs of the population. He proposes that the government actively pursue commercially viable infrastructure investments through public-private partnerships to alleviate pressure on public finances and free up resources for other essential areas.
Paragraph 6: Recurrent Expenditure Allocation and Budgetary Implications
The report also reveals substantial allocations for recurrent expenditure in the proposed 2025 budgets of thirteen Nigerian states, totaling approximately N3.87 trillion. This high proportion of recurrent expenditure further underscores the fiscal challenges faced by states, with limited resources available for capital investments that could drive long-term economic growth. The combination of rising debt service obligations, significant borrowing plans, and substantial recurrent expenditure allocations presents a complex financial landscape for Nigerian states, requiring strategic fiscal management and innovative approaches to resource mobilization to ensure sustainable development.
