States groan under declining revenue allocation as debt to CBN crosses N1tr

States in Nigeria are in a terrible financial situation and are scrambling to find ways to pay salaries and other budget obligations as funding from the federation account is being cut back.

The Central Bank of Nigeria’s most recent data revealed that from just over N14 billion in April 2016, the state’s debt had grown to N1.24 trillion.
According to the debt breakdown by year, states had a debt stock of N300.38 billion as of December 2016 and N590.42 billion the following year.

States’ debt to the CBN steadily decreased from N614.92 trillion in September 2019 to N600.62 billion in October 2021, but it increased to N700.47 billion in December.

However, the CBN latest data revealed that the debt had increased to N1.24 trillion in June this year.

The states’ increased borrowings followed dwindling FAAC disbursement to states, which according to the National Bureau of Statistics dropped from N640.16 billion in Q4 2021 to N590.45 billion in the first quarter of this year.

Aside from CBN, the states are also indebted to domestic investors including banks.

The Debt Management Office (DMO) in March reported that the states’ debt stock stood at N4.84 trillion.

Lagos, Ogun, Rivers, Imo, and Akwa Ibom are the five most indebted states with N1.65 trillion which is over a third of the domestic debt.

The DMO data showed that Lagos, with a total debt of N780.5 billion as of March is the most indebted state in Nigeria with 16.26 percent of the subnational debts.

Ogun followed with N242 billion while Rivers Imo and Akwa Ibom had N225.5 billion, N204.6 billion, and N203.1 billion respectively.