In the first quarter of 2026, a striking divergence emerged across Nigeria's sub-national fiscal landscape. Despite a significant influx of revenue from the Federation Account Allocation Committee (FAAC); driven largely by federal tax and revenue-sharing reforms that saw state disbursements jump by nearly 26 per cent to ₦2.49tn seven state governments and the Federal Capital Territory increased their combined domestic debt stocks by ₦355.18bn. This surge occurred alongside repeated assurances from several state governors that their administrations had taken on no new commercial loans to fund public projects, raising fresh questions about how increased federal transfers affect sub-national borrowing needs.
The borrowing trend, however, was far from universal. Data from the Debt Management Office reveals that while the total domestic debt for the 36 states and the FCT expanded by 3.74 per cent (rising from ₦4.36tn to ₦4.52tn), the gross increase was concentrated in just a few territories. In fact, 29 states actively reduced their debt obligations, offsetting more than half of the gross borrowing and leaving Jigawa as the sole state with an unchanged debt profile. The heaviest increases were heavily concentrated in the FCT, Edo, and Borno, which together accounted for over 92 per cent of the total debt growth. The FCT led the expansion by more than doubling its domestic debt stock from ₦188.86bn to ₦389.88bn, followed by Edo, which recorded an 89 per cent jump to ₦172.37bn, and Borno, where debt doubled to ₦88.44bn. Yobe, Benue, Kaduna, and Nasarawa also recorded smaller additions to their total liabilities.
This rise in reported debt stocks illustrates a key nuance in public accounting: a state's total outstanding debt can increase without the current administration signing new loan agreements. In Kaduna, for example, where domestic debt rose by ₦3.22bn to ₦87.87bn, government officials explained that the figure reflects continued drawdowns on pre-existing loan facilities negotiated by previous administrations. Terminating those facilities early would have triggered steep financial penalties, prompting the current government to service and draw from established lines of credit while maintaining that no fresh loans were contracted.
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Conversely, several states managed to translate higher revenue inflows into substantial debt reduction. Delta State achieved the largest absolute drop, slashing its domestic debt by ₦34.98bn to ₦213.85bn, aligning with official claims that ongoing infrastructure projects have been executed entirely without bank loans. Enugu recorded the sharpest overall decrease, cutting its debt stock by nearly 24 per cent to ₦120.03bn. Other states including Anambra, Kano, Akwa Ibom, Kwara, and Oyo also posted notable debt reductions. Even Lagos, which remains by far the most heavily indebted sub-national entity with ₦1.205tn in domestic debt (accounting for over a quarter of the total across all states), managed a modest ₦14.41bn reduction during the quarter.
Ultimately, these sub-national movements mirror Nigeria's broader economic environment, where total public debt reached ₦159.35tn at the end of March 2026. Financial experts note that rising debt levels are not inherently problematic if the capital is deployed effectively into productive infrastructure that drives long-term economic growth. However, as federal allocations continue to rise, the contrasting approaches between states expanding their liabilities and those actively paying them down highlight a wide split in fiscal management strategies across the nation.
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