Seven States, FCT Add N355bn to Domestic Debt Despite Higher FAAC Allocations
Seven state governments and the Federal Capital Territory (FCT) increased their domestic debt stocks by a combined N355.18 billion in the first quarter of 2026, even as some governors maintained that their administrations had not contracted fresh loans.
Data from the Debt Management Office (DMO) showed that the increase was concentrated in seven states and the FCT, while 29 other sub-national governments recorded declines in their domestic debt between December 31, 2025 and March 31, 2026.
The affected entities were the FCT, Edo, Borno, Yobe, Benue, Kaduna and Nasarawa. Their combined domestic debt stood at N977.15 billion as of March 31.
Overall, the domestic debt of the 36 states and the FCT increased from N4.36 trillion at the end of December 2025 to N4.52 trillion by March 2026. This represented a net increase of N163.25 billion, or 3.74 per cent.
However, the gross increase among the entities with higher debt was significantly larger because it was partly offset by debt reductions recorded elsewhere.
The FCT recorded the largest increase, with its domestic debt more than doubling from N188.86 billion to N389.88 billion. The N201.01 billion increase represented 106.43 per cent.
Edo followed with an increase of N81.19 billion, taking its debt from N91.18 billion to N172.37 billion, an 89.04 per cent rise.
Borno’s domestic debt increased by N45.80 billion, from N42.64 billion to N88.44 billion, representing a 107.40 per cent increase.
Yobe recorded an increase of N17.60 billion, moving from N81 billion to N98.59 billion, while Benue’s debt rose by N5.62 billion from N107.23 billion to N112.85 billion.
Kaduna added N3.22 billion to its domestic debt, which rose from N84.64 billion to N87.87 billion. Nasarawa recorded the smallest increase, with its debt rising by N743.55 million from N26.41 billion to N27.15 billion.
The increase in debt came despite a significant rise in allocations from the Federation Account during the quarter.
The 36 states received an estimated N2.49 trillion in FAAC allocations during the first quarter of 2026, compared with approximately N1.98 trillion in the corresponding period of 2025. The increase of about N510 billion represented a 25.8 per cent rise.
Improved revenue from Value Added Tax and other revenue sources following fiscal and tax reforms contributed significantly to the increase in allocations.
However, the DMO figures do not necessarily mean that the affected governments contracted new loans during the quarter. An increase in reported debt stock can result from fresh borrowing or drawdowns from existing facilities, as well as other changes in outstanding obligations.
Kaduna provides an example of this distinction.
The state government had earlier denied reports that Governor Uba Sani’s administration was taking new loans to finance its 2026 budget. The Commissioner for Planning and Budget, Mukhtar Monrovia, said the budget would be financed through statutory allocations, internally generated revenue and grants.
He explained that the loan drawdown included in the budget related to facilities obtained by previous administrations.
“Previous administrations had collected loans, and the state is drawing down from them, but no new loans have been collected by the Governor Uba Sani Government,” he said.
Despite the clarification, DMO data showed that Kaduna’s domestic debt increased by N3.22 billion during the first quarter.
Delta State recorded a different trend.
Governor Sheriff Oborevwori has repeatedly maintained that his administration has not borrowed to finance development projects. In May, he said the state had executed projects without borrowing from banks or other sources.
The DMO data showed that Delta’s domestic debt fell from N248.83 billion at the end of 2025 to N213.85 billion in March 2026, representing a reduction of N34.98 billion, or 14.06 per cent.
The state recorded the largest absolute decline among the 36 states and the FCT during the period.
Kano also reduced its domestic debt, from N53.75 billion to N52.46 billion, a decline of N1.29 billion, or 2.40 per cent.
The development followed the state government’s earlier denial that Governor Abba Kabir Yusuf was borrowing to finance projects. The Commissioner for Budget and Planning, Musa Sulaiman Shanono, said the administration had not borrowed either domestically or internationally since assuming office.
Anambra recorded an even larger percentage decline, reducing its domestic debt from N11.55 billion to N9.62 billion. The N1.93 billion reduction represented 16.74 per cent.
Governor Chukwuma Soludo has consistently advocated a cautious approach to borrowing, saying loans should only be obtained for projects capable of generating sufficient returns to repay them.
Akwa Ibom also reduced its domestic debt, from N84.85 billion to N83.63 billion, a decline of N1.22 billion, or 1.44 per cent. The reduction followed efforts by the state government to clear outstanding bank obligations.
Despite the varying movements, Lagos remained the state with the largest domestic debt stock. Its debt declined from N1.219 trillion to N1.205 trillion, a reduction of N14.41 billion, or 1.18 per cent.
Rivers ranked second with N362.43 billion after reducing its debt by N16.37 billion. Delta followed with N213.85 billion, while Ogun and Edo had N200.75 billion and N172.37 billion respectively.
Overall, the DMO data showed that the rise in state domestic debt was not widespread. Of the 37 entities covered, seven states and the FCT recorded increases, 29 recorded reductions, while Jigawa’s debt remained unchanged at N1.60 billion.
The 29 entities that reduced their debt recorded combined reductions of N191.93 billion, offsetting more than half of the N355.18 billion increase recorded by the entities whose debt stocks rose.
The FCT, Edo and Borno accounted for about 92 per cent of the total increase, contributing N328 billion between them.
The figures therefore present a mixed fiscal picture. While some sub-national governments are using improved revenues to reduce outstanding liabilities, others have recorded significant increases in domestic debt.
The trend comes amid a broader rise in Nigeria’s public debt. The country’s total public debt stock reached N159.35 trillion at the end of March 2026, highlighting the continued reliance on borrowing by governments despite efforts to improve revenue collection and fiscal management.
Economists have, however, stressed that borrowing itself is not necessarily the problem, provided borrowed funds are invested in productive projects capable of generating economic returns.
Chief Economist and Director of Research at the Nigerian Economic Summit Group, Dr Olusegun Omisakin, said the key issue was how borrowed funds were utilised.
Similarly, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, said Nigeria needed to ensure that its debt remained sustainable and reduce its dependence on borrowing through stronger revenue mobilisation and fiscal discipline.
