₦airaland Forum

-Domestic borrowing hits N4trn
-FAAC allocations jump 161% in three years, IGR lags.

States across Nigeria are ramping up borrowing despite a surge in allocations from the Federation Account Allocation Committee (FAAC), which has risen by 161 percent in the past three years, raising concerns about fiscal sustainability and the slow pace of growth in Internally Generated Revenue (IGR).

New data indicate a reversal of a year-long trend of fiscal consolidation that had initially seen debt stocks plummet.

A BusinessDay analysis of state domestic debt profiles, as published by the National Bureau of Statistics (NBS), indicated an aggressive descent from N5.8 trillion recorded in December 2023 to a low of N3.8 trillion in March 2025. However, the report for 2025 shows that the aggregate debt profile of Nigeria’s 36 states and FCT has begun to climb again, hitting N4 trillion by September 2025.

States with the highest domestic debt profiles as of September 2025 include Lagos (N1.04 trillion), Rivers (N381 billion), Delta (N247 billion), Enugu (N194.7 billion), and Ogun (N168 billion).

On the external front, the states’ debt profile rose from $4.349 billion to $4.811 billion as of June 2025. Lagos State also led this category with $1.049 billion in total external debt, followed by Kaduna ($658 million), Edo ($337 million), Ogun ($214 million), and Cross River ($201 million).

The resurgence of borrowing comes amid a continued rise in the monthly federal allocations disbursed to state governments since the inception of the Tinubu-led administration.

The NBS report on FAAC disbursements showed that states shared N2.80 trillion in 2022, before the current administration. However, BusinessDay analysis shows that disbursements have continued on a steady rise, reaching N3.53 trillion in 2023, N5.27 trillion in 2024, and N7.315 trillion in 2025—representing a 161 percent increase from the amount shared in 2022.

Speaking with BusinessDay, Ishaq Ibrahim, an Abuja-based economist, said that despite the significant increase in statutory allocations, states have been unable or unwilling to fund their ambitions solely through their increased share of the Federation Account. He noted that the N200 billion expansion in debt between March and September 2025 suggests that the “easy gains” of fiscal reform may have been exhausted.

“While the initial drop to N3.8 trillion was hailed as a sign of improved fiscal health, the current uptick points to a growing mismatch between record revenues and escalating state expenditures,” Ibrahim said. He added that while the federal government has encouraged states to invest windfalls in productive sectors to cushion the effect of reforms, the return to borrowing suggests many states remain stuck in a cycle of deficit financing.

Ibrahim suggested that the implementation of the new minimum wage and the skyrocketing cost of infrastructure projects may be the primary drivers forcing states back into the credit market.

“This revenue-debt paradox raises urgent questions about fiscal discipline, as surging inflows intended to provide a social safety net are increasingly swallowed by rising debt-servicing costs and a renewed appetite for commercial loans,” he added.

Also commenting on the trend, Uzor Joseph, economic expert and Executive Director at Frontline Investments, noted that the upward debt trajectory underscores an urgent mandate for states to aggressively expand their internally generated revenue (IGR) bases.

He explained that long-term solvency hinges on a state’s ability to mobilise revenues internally by effectively leveraging natural resource endowments, technology, public-private partnerships, human capital, and effective consequence management.

“This capacity is crucial for financing essential infrastructure, investing in human capital development, meeting the new minimum wage and its consequential adjustments, and repairing the fractured social contract,” Joseph said.

“To achieve debt sustainability, states must also curb their reliance on foreign loans—especially in light of exchange rate volatility—to minimise exposure to unfavourable rates. Additionally, states should establish robust frameworks for transparency, ensuring borrowed funds are allocated to high-impact projects with clear economic returns,” he said.

Also, BusinessDay’s analysis of states’ revenue performance report for the first half of 2025 (January to June) published by Agora policy, showed that 30 out of 36 states generated N6.05 trillion revenue, representing 87 percent of the total revenue (N6.95 trillion) target for the period.

Of the total N6.05 trillion realised in the period, FAAC allocations accounted for N4.46 trillion (73.8 percent) while the internally generated revenue was N1.59 trillion (26.2 percent).

The report showed that of the 30 states reviewed in the report, FAAC disbursement accounted for 70 – 95 percent of the total revenues of 29 states. Only Lagos state had FAAC allocations representing 30 percent of its total revenue.

According to the report, Lagos state generated the highest revenue in the first half of 2025 at N1.28 trillion, as against N1.46 trillion budgeted. Of this revenue, 70.1 percent was internally generated, and 28.9 was FAAC allocations.

Lagos state was followed by Akwa Ibom with a total revenue of N579 billion, higher than N415 billion budgeted in the period. 90 percent of the total revenue posted was from FAAC while only 10 was generated internally. Bayelsa and Edo states followed as the third and fourth states with the highest total revenue in the period, as their revenues stood at N291 billion and N264 billion, respectively.

“Akwa Ibom, Lagos, and Edo topped the list of states that received more FAAC revenue than projected, while Osun, Zamfara, and Kaduna recorded the highest shortfalls compared to their FAAC projections.

“11 states generated more IGR than projected in their budgets, while 19 fell short of their IGR targets. Among the 11 states that exceeded their IGR targets, Akwa Ibom, Cross River, and Ekiti ranked highest, while Jigawa, Taraba, and Sokoto were the lowest performers among the 19 states that fell short of their targets,” the report stated.

seunmsg:
Is the airport in Jos or Abuja?

The real test of success will not be measured in GDP figures or foreign reserves but in whether ordinary Nigerians can afford food, find meaningful work, and regain hope. Growth that exists only in statistics is not prosperity.

For Nigeria, the task ahead is to ensure that economic expansion finally translates into economic relief for all.

Currently, the numbers from the Nigerian economy suggest recovery, yet the lived reality of millions of citizens tells a different story. On paper, the economy is expanding at its fastest pace in three years. In reality, households continue to sink deeper into hardship, squeezed by a cost-of-living crisis.

According to the National Bureau of Statistics, Nigeria’s economy grew by 3.87 percent in 2025, with fourth-quarter output rising by 4.07 percent year-on-year. It is the strongest yearly performance since 2022 and, by conventional economic standards, a sign that the nation may finally be turning the corner after years of instability.

For many Nigerians, this recovery remains largely statistical.q “On paper, the economy is expanding at its fastest pace in three years. In reality, households continue to sink deeper into hardship, squeezed by a cost-of-living crisis.”

The economic reforms introduced by President Bola Tinubu in 2023 were designed to correct deep structural distortions. The removal of fuel subsidies and the unification of the exchange rate were bold decisions long recommended by economists and international financial institutions. By allowing the naira to float and dismantling the opaque multi-tier currency system, the government signalled its willingness to confront longstanding economic inefficiencies.

There are signs that these reforms have begun to stabilise key macroeconomic indicators. External reserves have climbed to roughly $50 billion, the highest level in about 13 years, while the naira has strengthened modestly this year. Inflation, though still high, has begun to trend downward before the recent Gulf War, and investor confidence has shown some signs of improvement.

Despite the improving statistics, living standards have continued to deteriorate. Inflation over the past two years has eroded purchasing power, leaving both low-income households and the once-resilient middle class struggling. Basic necessities, particularly food and energy, have become increasingly unaffordable.

The price of staple foods illustrates the scale of the crisis. Meanwhile, wages have remained largely stagnant. Even as food inflation begins to moderate statistically, millions of Nigerians are still unable to afford adequate meals. The result is a painful disconnect between economic growth and human welfare.

A recent report by PwC projects that Nigeria’s poverty crisis will deepen further in 2026. The number of people living below the poverty line is expected to rise from 139 million to 141 million, about 62 percent of the population. That figure would represent the highest poverty level ever recorded in Nigeria.

Such projections underscore a troubling reality: economic growth that does not create jobs or raise incomes will do little to improve the lives of ordinary citizens. At the heart of the problem lies Nigeria’s weak productive base. While sectors such as finance and telecoms continue to expand, the industries that traditionally absorb large numbers of workers remain stagnant.

Manufacturing provides a telling example. According to the Manufacturers Association of Nigeria, the sector accounts for roughly 80 per cent of employment opportunities across the value chain. Yet its contribution to real economic output remains painfully small.

In the fourth quarter of 2025, manufacturing accounted for only 1.13 percent of GDP in real terms, down from 1.25 percent in the preceding quarter. This decline reflects a broader loss of investor confidence in the sector.

Foreign investment in manufacturing plunged by more than 54 percent during the first nine months of 2025, even as overall capital importation into the nation rose sharply. Investors appear increasingly wary of structural obstacles such as high energy costs, poor infrastructure, currency volatility, and an unpredictable policy environment.

The consequences are predictable. When manufacturing slows, job creation suffers, an[sub][/sub]d when jobs disappear, poverty expands. On the other hand, when poverty rises, economic growth becomes disconnected from the welfare of the people it is supposed to serve. Nigeria’s challenge, therefore, is not merely to grow but to grow in a way that creates broad-based prosperity.

Adetilewa Adebajo, an economist, has argued that Nigeria must achieve sustained growth of between 8 and 10 percent yearly to significantly improve living standards. Such expansion cannot be driven by consumption or extractive industries alone. It must be anchored in productivity, industrialisation, and large-scale job creation.

Therefore, reviving the manufacturing sector should be a national priority. Reliable electricity, affordable credit for producers, improved logistics infrastructure, and stable trade policies are essential for restoring investor confidence. Industrial zones and export-processing hubs must move from policy documents to practical implementation.

Agriculture also requires urgent modernisation, as food insecurity remains one of the biggest drivers of inflation and poverty. Investment in storage facilities, irrigation systems, rural roads, and agricultural technology could dramatically increase food supply while creating millions of jobs across the value chain.

Equally important is the need for targeted social protection. Economic reforms often impose short-term pain before long-term gains materialise. Without safety nets, such as cash transfers, food subsidies for vulnerable households, and employment programmes, the poorest citizens will continue to bear a disproportionate share of the burden.

The real test of success will not be measured in GDP figures or foreign reserves but in whether ordinary Nigerians can afford food, find meaningful work, and regain hope. Growth that exists only in statistics is not prosperity. For Nigeria, the task ahead is to ensure that economic expansion finally translates into economic relief for all.

https://www.youtube.com/watch?v=H49EBq4B7yA?si=l7vl0iOzVT2DNIPc

I'm Thankful For Every Takeoff, Every Rough Flight, And Every Safe Landing ...This is To Greater Heights

#captaincallistus #birthdaywishes #GratefulHeart #celebration #happybirthday

seunmsg:
It is therefore highly escapist and irresponsible for the ADC to blame the APC for its internal woes, of which they are the sole architects.

To Tinubu and the APC, if Nigeria is to mature as a democracy, its electoral system must be improved. He decried the fact that those who control the system manipulate elections with such impunity that they now see misconduct without sanction as a normal way of life.

"Yesterday defenders of democracy, today's destroyers, What a shame."

What an irony of history, that the acclaimed defenders of democracy and human rights who claimed to have fought for democracy during the era of General Sani Abacha now find themselves worse than the man they opposed.

Today, General Sani Abacha, once presumed face of oppression, will be remembered as seemingly more democratic and more respectful of human rights than the so-called champions of activism from the NADECO days. Power indeed reveals character.

A New Nigeria is POssible.

- PO