…Says Kaduna, Ogun, Bauchi, Cross River worst hit
By Uche Usim
The Nigeria Extractive Industries Transparency Initiative (NEITI) has raised the alarm that between 10 and 30 per cent of monthly federal allocations to Nigeria’s states are deducted at the source for debt servicing, urging them to embrace smarter borrowing and stricter fiscal discipline as the development leaves lean resources for grassroots development, social services and vital infrastructure.
The warning is contained in the latest Policy Brief by the Nigeria Extractive Industries Transparency Initiative (NEITI) titled: “Beyond Federal Allocations: The Cost of Borrowings and Debt Servicing at State Level in Nigeria”, which was released on Sunday.
The report offers fresh, evidence-based insights into how mounting debt burdens are undermining economic stability at the subnational level and weakening the developmental impact of extractive revenues. NEITI noted that while Nigeria’s states receive substantial monthly allocations from the Federation Account, much of it derived from extractive revenues, the fiscal space for grassroots infrastructure, social services and poverty alleviation is severely diminished when up to a third of these allocations are diverted to settle debts before they reach state treasuries.
The agency explained that the research was conducted in line with its statutory mandate under the NEITI Act 2007 and the global Extractive Industries Transparency Initiative (EITI) Standards, which require disclosures on revenue allocations and subnational transfers.
NEITI revealed that in 2024, Kaduna State recorded the highest debt-servicing ratio at 32.06 per cent, meaning N51.2 billion was deducted from its N159.7 billion gross allocations. Ogun followed with 27 per cent, amounting to N33 billion from N123 billion; Bauchi had 26 per cent, with N37 billion deducted from N142 billion; and Cross River recorded 24 percent, losing N28 billion from N119 billion.
In contrast, Borno had a ratio of just 2.63 percent, Jigawa 2.74 percent, Benue -3.58 percent, and Nasarawa -3.82 percent. Other states with low debt burdens include Kebbi at 4.06 percent, Bayelsa -4.46 percent, and Anambra 4.54 percent, all retaining over 95 percent of their allocations for direct development spending. NEITI observed that these low-debt states provide practical models for maintaining a healthy debt-to-GDP profile while still leveraging borrowing for targeted development. Such a balance, it stressed, is vital for preserving fiscal sovereignty and avoiding dependency on future federal bailouts.
Beyond the headline debt figures, NEITI also drew attention to hidden liabilities tied to public-private partnerships and infrastructure projects. Ogun had N6 billion in contractual deductions in 2024, while Ondo’s stood at N7.73 billion. NEITI warned that “opaque contract terms and excessive deductions can undermine future fiscal space,” especially when repayment schedules stretch over years and are shielded from public scrutiny. Conversely, 18 states, including Abia, Adamawa, and Akwa Ibom, reported zero contractual deductions, suggesting a more cautious or strategically timed borrowing approach.
The Policy Brief also shed light on deep inequalities in the revenue-sharing formula. In 2024, Delta State received N581.27 billion—more than five times the N108.32 billion allocated to Nasarawa.
NEITI cautioned that such disparities, when combined with high debt-servicing ratios in lower-allocation states, could worsen fiscal inequality and entrench underdevelopment in some regions. “If left unaddressed, this could entrench a structural imbalance where poorer states are trapped in a cycle of debt and underdevelopment,” the report stated.
NEITI’s Executive Secretary, Dr. Orji Ogbonnaya Orji, emphasised that the publication is not an exercise in naming and shaming but a practical tool for reform. “This is not a name-and-shame exercise, but a mirror and a map, a mirror to reflect fiscal realities, and a map to guide states toward resilience, transparency, and equitable growth,” he said.
Dr. Orji noted that while debt can be a powerful tool for development when managed efficiently, it becomes a threat when repayments consume up to a third of monthly revenues. “Debt, when managed efficiently, can be a tool for financing development at the grassroots. But when servicing obligations consume up to a third of monthly revenues, it becomes a threat to the future of public service delivery and economic stability,” he warned.
He further explained that NEITI’s recommendations align with both its domestic mandate and Nigeria’s obligations under global EITI Standards, particularly in the areas of debt transparency, subnational transfers, and revenue governance. As Nigeria navigates a difficult fiscal climate, marked by inflation, volatile revenues, and competing demands for expenditure, NEITI’s Policy Brief serves as both a red flag and a reform blueprint. It urges state and federal authorities to act decisively, adopting bold reforms before debt becomes, in NEITI’s words, “not just a burden, but a destination.”
The report has been submitted to the Federal Government, the National Assembly, relevant ministries and agencies, the National Economic Council, the Nigeria Governors’ Forum, and state commissioners of finance and accountants-general. It is also publicly accessible on NEITI’s website, giving citizens, civil society, and the media the tools to track reforms and hold state governments accountable.
Analysts believe NEITI’s findings could not have come at a more critical time. The fiscal squeeze from heavy debt repayments is occurring against a backdrop of rising poverty, unemployment, and underfunded infrastructure projects nationwide. In many states, these deductions from FAAC allocations have translated into delayed salary payments, stalled projects, and weakened social safety nets.
By linking debt transparency to extractive revenue governance, NEITI has shifted the conversation from abstract fiscal ratios to tangible impacts: the roads left unbuilt, the schools unrepaired, the hospitals lacking essential medicines because funds were diverted to service loans. The message is clear, borrowing is not inherently bad, but opaque and excessive borrowing is both economically and socially costly.
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