By Adeyemi David
Nigeria’s state governments have witnessed unprecedented revenue growth in the past two years, driven by rising Federation Account Allocation Committee (FAAC) disbursements, fuel subsidy removal, foreign exchange reforms, and improved oil receipts.
Total FAAC allocations surged from N8.21 trillion in 2022 to N15.26 trillion in 2024, and preliminary data for 2025 indicates inflows of about N33.27 trillion—nearly double the previous year.
Despite these record revenues, rising debt obligations are limiting the capacity of states to invest in healthcare, education, and other human development priorities.
BudgIT’s State of States 2025 report shows that states spent N2.11 trillion on debt servicing in 2024, representing 26.45 percent of total expenditure.
The total debt stock of 35 states rose by 6.87 percent to N10.57 trillion, with domestic debt declining sharply by 35.98 percent, while foreign debt increased slightly to $4.58 billion.
Foreign-denominated debt now dominates state obligations, with 24 states holding more than half their debt in US dollars.
Kaduna, Jigawa, and Ondo top the list with 97.39 percent, 96.42 percent, and 90.04 percent of their debt in foreign currency, respectively.
This exposure to exchange rate volatility heightens fiscal vulnerability, particularly as foreign debt service payments surged to N455.38 billion in 2025 from N362.08 billion in 2024. Lagos led the deductions at N92.80 billion, followed by Rivers and Kaduna.
Human development spending, however, remains minimal. On average, states spent only N3,483 per person on healthcare in 2024, with no state exceeding N10,000 per capita.
Only Lagos, Bayelsa, Edo, Abia, Kwara, Niger, and Delta surpassed N5,000 per person.
This low investment comes amid rising poverty, which climbed to 61 percent in 2025, affecting about 139 million Nigerians, with projections indicating 62 percent by 2026.
Analysts attribute the disconnect between revenue growth and social investment to political incentives.
“Governors often prioritise visible infrastructure projects such as roads and bridges over long-term investments in human capital, which take years to yield results,” said Kabir Isah, a public affairs analyst in Abuja.
BudgIT’s Deputy Country Director, Vahyala Kwaga, stressed that citizens must demand accountable governance and credible commitments from political aspirants.
Nigeria’s states now face a critical test: whether record revenue inflows can translate into tangible welfare gains for citizens, or whether rising debt obligations and politically motivated spending will continue to crowd out investments in human capital and inclusive development.
