The total debt for Nigerian states as of June 30, 2024, surged to N11.47 trillion, reflecting a 14.57 percent increase from N10.01 trillion at the end of 2023.
This rise is largely attributed to a sharp increase in external debt, exacerbated by the naira’s devaluation.
Between December 2023 and June 2024, states’ external debt grew from $4.61 billion to $4.89 billion, translating to a 6.14 percent increase in dollar terms.
However, due to currency depreciation, this represented a much larger 73.46 percent jump in naira terms, going from N4.15 trillion to N7.2 trillion.
While external debt increased, domestic debt for states and the Federal Capital Territory, FCT, saw a notable reduction, falling by 27.12 percent from N5.86 trillion to N4.27 trillion.
Despite this decline, domestic debt levels rose by N200 billion between March and June 2024, indicating a gradual increase following an earlier dip. This brings the states and FCT’s share of Nigeria’s total public debt to 8.54 percent as of mid-2024.
Nationally, Nigeria’s overall public debt climbed to N134.3 trillion by June 2024, marking a 10.35 percent increase from the previous quarter.
This growth includes a notable N5.55 trillion increase in domestic debt, rising to N71.2 trillion. Meanwhile, external debt increased by $780 million, reaching $42.9 billion.
The devaluation of the naira has significantly affected the nation’s debt portfolio, especially external obligations, which have become more costly in naira terms despite modest additional borrowing.
The increase in state debts occurs even as the Federation Account Allocation Committee, FAAC, distributed higher revenue, thanks to elevated oil prices and favorable foreign exchange rates.
In the second quarter of 2024, the FAAC disbursed N3.473 trillion to the federal, state, and local governments, reflecting a 1.42 percent increase from the previous quarter.
The Federal Government received N1.102 trillion, the states collectively received N1.337 trillion, and local governments were allocated N864.98 billion. Additionally, nine oil-producing states received N169.26 billion as derivation funds.
Among the states, Delta, Lagos, and Rivers received the highest FAAC allocations in the second quarter of 2024.
Conversely, Nasarawa, Ebonyi, and Ekiti received the least. Debt increases were substantial in certain states, with Rivers seeing a 67 percnet surge, Taraba’s debt growing by 160 percent, and Niger’s by 70 percent.
Lagos, however, managed to reduce its debt by 5 percent, decreasing its domestic debt from N929.41 billion in March to N885.99 billion in June. Delta and Bayelsa also made notable debt reductions.
On the external debt front, Lagos continued to hold the highest debt but achieved a slight reduction. Enugu and Gombe, however, led in debt reduction efforts, cutting their foreign obligations by 32.83 percent and 35.49 percent, respectively.
Conversely, Rivers, Borno, and Katsina states saw sharp rises in external debt, with Rivers’ debt increasing by 151.8 percnet.
Debt servicing remains a burden, consuming 80.7 percent of internally generated revenue for 29 states in the first half of 2024.
With such high debt servicing costs, states face challenges in achieving economic stability. Kaduna’s governor, Uba Sani, voiced concerns over the debt burden inherited from previous administrations, highlighting its impact on salary payments and limiting new borrowings.
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