Our Correspondent
Nigeria’s subnational governments (States) are sinking deeper into debt despite receiving unprecedented revenue inflows in 2024. Thiis is according to BudgIT’s newly released 2025 State of States report.
The findings reveal that 30 states collectively owe contractors and retirees a staggering N1.06tn, underscoring persistent fiscal mismanagement at the state level even in a year of historic federal allocations and improved internal revenues.
The report shows that states owed N434.87bn to contractors and N626.81bn in pension and gratuity arrears. Only three states—Borno, Kano, and Nasarawa—reported zero arrears, making them the only subnational governments without outstanding obligations to either contractors or retirees.
Kaduna emerged as the most indebted state, with combined arrears of N139.36bn. The state owes N56.07bn to contractors and a record N83.29bn in pensions and gratuities—the highest pension backlog nationwide. Ogun followed with N107.18bn, Benue with N99.68bn, Edo with N95.46bn, and Enugu with N90.18bn. Together, the top 10 debtor states account for nearly half of the nationwide arrears burden.
At the opposite end of the scale, Kano and Nasarawa maintained clean slates, while Lagos reported just N48.74m in contractor arrears and no pension backlog. Ebonyi, Borno, Jigawa, and Katsina also ranked among the states with minimal outstanding liabilities.
Beyond arrears owed to contractors and retirees, states also face N33.74bn in salary and staff claims, N62.33bn in judgment debts, and N73.25bn in other liabilities. In total, the 35 states analysed—excluding Rivers, which failed to produce audited accounts due to its political crisis—carried N1.24tn in outstanding obligations.
The report warns that these debts, if not urgently addressed, could impede capital projects, deepen fiscal instability, and erode public trust, especially among vulnerable retirees awaiting their entitlements.
Despite the huge backlogs, states received record revenues in 2024. Gross FAAC allocations surged to N11.38tn—more than double the N5.4tn disbursed in 2023—largely due to fuel subsidy removal and exchange-rate reforms. Still, BudgIT found that many states continued to prioritise recurrent expenditure and political commitments over clearing legacy debts.
Some states face a particularly dire fiscal imbalance. Kaduna, Benue, Adamawa, and Taraba recorded arrears that exceeded their Internally Generated Revenue for 2024—raising questions about long-term solvency. Benue, for instance, generated N20.92bn internally but owed N99.68bn, meaning the state would require nearly five full years of IGR to clear its debts if it dedicated all revenue solely to repayments.
Adamawa and Taraba also owe significantly more in pension liabilities than their IGR, reflecting an expanding retirement-cost burden and years of unpaid obligations.
Pension administration remains a critical weakness across the country. According to the National Pension Commission, only 17 states currently implement the Contributory Pension Scheme (CPS) introduced under the 2004 Pension Reform Act. Twelve states have not begun implementation, while seven are still establishing their pension bureaus.
The Nigerian Union of Pensioners has repeatedly accused state governments of delaying payments and failing to adopt sustainable pension structures. Its spokesperson, Bunmi Ogunkolade, urged states to “end the foot-dragging” and fulfil their obligations to retirees.
The fiscal strain is not limited to states. Earlier this month, operations at the National Assembly were disrupted as contractors protested over an alleged N3tn owed by the Federal Government for completed projects. Demonstrators blocked all major entrances, demanding immediate settlement of debts after what they described as years of unfulfilled assurances.
With both federal and state liabilities mounting, BudgIT’s report has renewed calls for deeper fiscal reforms, stricter accountability, and a reordering of spending priorities. Analysts warn that unless governments confront their growing debt burdens, Nigeria risks sliding into a broader public-finance crisis with significant socio-economic consequences.