Nigeria’s debt burden has quadrupled in a decade, with little to show for it. In this analysis (part 3 of 5), we examine how the Federal Government and the states have turned borrowing into routine survival — and how a few are beginning to chart a cautious path toward fiscal recovery.
By Deen Alimi
Nigeria’s debt story is like a patient who keeps taking new loans for medicine without ever changing the habit that causes the sickness.
Every year, governments at all levels borrow more to do less — a pattern that has turned fiscal management into debt management. From 2015 to 2024, Nigeria’s total public debt jumped from ₦12.6 trillion to nearly ₦97 trillion, an increase of more than 670 percent.
In the same period, poverty deepened, infrastructure lagged, and revenue performance struggled to keep pace. The paradox is clear: Nigeria is not short of loans, but short of results.
The Federal Debt Picture: Revenue Can’t Catch Up
The Federal Government carries the heaviest load — over ₦87 trillion, or about 90 percent of Nigeria’s total public debt.
By 2024, it spent ₦8.25 trillion servicing debt — roughly 75 percent of total revenue, leaving less than 25 percent for governance, salaries, and capital projects combined.
For context, in 2015 the debt-to-revenue ratio was about 35 percent. It rose to 83 percent in 2020, then spiked above 400 percent by 2024, according to the Debt Management Office (DMO) and IMF estimates.
That means for every ₦1 the Federal Government earns; it owes more than ₦4 — a figure that has pushed Nigeria to the brink of a debt-servicing crisis.
Government’s Efforts So Far
To its credit, Abuja has taken some corrective steps. The Medium-Term Debt Strategy (MTDS) aims to reduce the debt-service ratio to 60 percent by 2027 by:
- restructuring high-interest domestic debt into longer-term instruments,
- boosting non-oil tax collection through automation, and
- raising oil production toward 1.8 million barrels per day.
But without decisive control of recurrent spending and a stronger export base, these steps remain half-measures — managing the symptoms, not the disease.
The States: Small Economies, Big Debts
While the Federal Government borrows for macro stability, many states borrow simply to survive.
BudgIT’s State of the States 2025 Report shows total subnational debt rising from ₦1.7 trillion in 2015 to ₦9.17 trillion in 2024. The problem is that most states’ revenues haven’t kept pace.
Debt Sustainability Snapshot (2024):
- Lagos: ₦1.25 trillion debt vs ₦1.9 trillion IGR — debt-to-revenue ratio ~66% (sustainable)
- Ogun: ₦312 billion debt vs ₦226 billion revenue — 138% (manageable)
- Kwara: ₦153 billion debt vs ₦144 billion revenue — 106% (stable)
- Delta: ₦478 billion debt vs ₦111 billion IGR — 430% (unsustainable)
- Bayelsa: ₦372 billion debt vs ₦30.8 billion IGR — 1,200% (critical)
- Kogi: ₦156 billion debt vs ₦16 billion IGR — 975% (high risk)
On average, states’ debt-to-revenue ratio stands at about 180–220 percent, meaning most of them owe twice as much as they earn annually.
Efforts to Tame the Tide
Some federating units have begun reforms to slow the spiral:
- Kwara, Anambra, and Ekiti have improved debt transparency and limited new borrowing.
- Lagos has shifted from short-term bank loans to infrastructure bonds tied to toll and tax returns.
- Ogun and Nasarawa are investing in industrial hubs to grow IGR instead of relying on FAAC.
- Kano and Kaduna have introduced debt audits to reconcile local and foreign liabilities.
These are small but promising signs that fiscal responsibility can take root when leadership sees debt as a tool, not a trophy.
Revenue Growth vs Debt Growth (2015–2024)
While debt rose by over 670 percent, revenue across the federation grew by less than 120 percent — much of it nominal due to naira depreciation after FX unification.
In real terms, this means that Nigeria’s borrowing has far outpaced its earning capacity. The result is a fiscal treadmill: governments run faster every year just to stay in the same place.
The Federal Government still depends on oil for more than half its earnings, while most states rely on FAAC for between 70 and 90 percent of their income.
This imbalance leaves little resilience for shocks — whether global oil price dips or domestic revenue shortfalls.
Ranking Fiscal Sustainability Across the States
BudgIT’s fiscal sustainability index groups Nigeria’s states into three categories based on debt burden, IGR growth, and governance quality:
High Sustainability (Disciplined Borrowers)
Lagos, Ogun, Anambra, Kwara, Abia, Edo, Nasarawa, Ekiti
They maintain manageable debt levels and tie borrowing to projects that yield returns — toll roads, ports, industrial parks.
They borrow with purpose and repay with progress.
Moderate Sustainability (Mixed Record)
Oyo, Ondo, Delta, Akwa Ibom, Enugu, Kaduna, Cross River, Osun, Benue, Plateau
Borrowing is frequent but not always tied to measurable growth. Some are improving transparency, but results vary.
They borrow for ambition, not always for value.
Low Sustainability (Debt-Driven Dependence)
Bayelsa, Kogi, Zamfara, Katsina, Niger, Borno, Yobe, Taraba, Kebbi, Gombe, Adamawa, Sokoto
High debts, weak IGR, and poor fiscal discipline define this group. Most depend almost entirely on FAAC and borrow just to pay wages.
They borrow to breathe — waiting for the next bailout.
The Illusion of Borrowed Prosperity
Debt can drive development when properly managed. But when borrowed funds maintain bureaucracy rather than build capacity, it becomes a tax on the unborn.
Nigeria’s challenge is not debt in itself — it is the lack of return on debt. If ₦1 trillion in loans does not yield ₦2 trillion in public value, the system collapses into a cycle of dependency.
This is why, despite huge loans, Nigeria still has an infrastructure gap of over $100 billion, and why citizens rarely associate borrowing with progress.
The Path to Real Fiscal Sustainability
- Borrow Only for Growth:
Every new loan should fund assets that generate measurable returns — from power plants to export processing zones. - Tie Borrowing to Revenue Performance:
Both federal and state governments should set debt ceilings as a ratio of actual revenue, not optimistic projections. - Strengthen Transparency and Citizen Oversight:
All debt agreements, disbursements, and repayments must be publicly available. Lagos and Kwara are already leading in this; others must follow. - Build Economic Diversity:
The real exit from the debt trap lies in production — agriculture, technology, and manufacturing that expand taxable activity and reduce dependence on FAAC.
Final Reflection
Debt, when disciplined, builds nations. But debt without direction builds nothing but excuses.
Nigeria’s fiscal health today reflects a dangerous imbalance — revenues that crawl and debts that sprint. The Federal Government’s debt-to-revenue ratio remains among the worst in the world; many states are following the same path.
Yet, within the gloom are glimmers of reform: states tightening borrowing rules, auditing liabilities, and investing in productivity rather than prestige.
The lesson is simple: the power to reverse this tide does not lie in new loans, but in new discipline.
Until our leaders learn that sustainability is not about how much you owe, but how wisely you grow, Nigeria will keep borrowing tomorrow to pay for yesterday.
