The latest figures from Nigeria’s Debt Management Office (DMO) reveal a dramatic improvement in the fiscal health of state governments, with Kaduna, Jigawa, and Ebonyi emerging as standout performers in reducing their debt burdens.
Between June 2023 and December 2024, Nigerian states collectively reduced their domestic debt by a staggering N1.85 trillion, representing a 31.8% decline from N5.82 trillion to N3.97 trillion.
This remarkable achievement has been largely attributed to increased federal allocations following President Bola Tinubu’s bold decision to remove fuel subsidies, coupled with prudent financial management by state governors.
Kaduna State’s fiscal turnaround has been particularly impressive, slashing its debt by 70.5% from N87.28 billion to N25.76 billion.
Governor Uba Sani’s administration has been widely praised for its disciplined approach to public finance, channeling the increased federal allocations into debt repayment while still maintaining critical infrastructure projects. The state’s success story has become a model for others, demonstrating how strategic financial management can create fiscal space for development.
Jigawa State achieved the most dramatic reduction, cutting its debt by an astonishing 96.9% from N43.13 billion to just N1.33 billion, making it Nigeria’s least indebted state. This extraordinary feat was accomplished through strict fiscal discipline and innovative revenue generation strategies. Similarly, Ebonyi State reduced its debt burden by 89.3%, from N76.14 billion to N8.11 billion, thanks to improved internally generated revenue and careful expenditure management.
Other states showing significant progress include Ondo, which reduced its debt by 82.6% (from N74 billion to N12.88 billion), Katsina with a 58.8% reduction (from N62.37 billion to N25.68 billion), and Kano, which halved its debt from N122.36 billion to N60.65 billion. These successes have been made possible by the combination of increased federal allocations and state governments’ commitment to fiscal responsibility.
The economic reforms initiated by the Tinubu administration, particularly the removal of fuel subsidies, have played a pivotal role in this debt reduction trend.
The subsequent increase in monthly FAAC allocations to states, coupled with a $2.25 billion World Bank support package for state fiscal sustainability, has provided the financial breathing room many states needed to address their debt challenges. Additionally, enhanced debt management capacity building programmes have equipped state financial officers with better tools for managing public finances.
However, the DMO report reveals a mixed picture across the federation. While 20 states successfully reduced their debt burdens, 16 others saw their debts increase during the same period. Abia State’s debt grew by 53.5%, Anambra’s by 62.4%, and Niger’s by 15.4%. Lagos State, despite reducing its debt by N96 billion, remains Nigeria’s most indebted state with N900 billion in obligations, highlighting the unique financial challenges faced by the country’s commercial hub.
Economic analysts have welcomed the overall improvement in state finances but caution against complacency.
As Nigeria’s subnational debt profile shows signs of improvement, attention is now shifting to ensuring these gains are sustained. Experts are calling for continued focus on expanding states’ internally generated revenue bases, implementing transparent budgeting processes, and maintaining prudent expenditure patterns.
With healthier balance sheets, many states are now better positioned to attract development financing and private investment. However, as the DMO prepares its next round of debt sustainability analyses, all eyes will be on whether the current trend of debt reduction can be maintained while still meeting the growing demands for infrastructure and social services across the nation.
The coming months will prove crucial in determining whether this marks the beginning of a new era of fiscal responsibility in Nigeria’s state governments or merely a temporary improvement driven by exceptional circumstances.
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