States Ramp Up Borrowing Despite 161% Jump in FAAC Allocations

States across Nigeria have boosted domestic borrowing to ₦4 trillion by September 2025, even as FAAC allocations rose 161% in three years. This reversal follows a brief period when debt stocks fell from ₦5.8 trillion to ₦3.8 trillion between December 2023 and March 2025. Lagos leads domestic debt at over ₦1 trillion, while Rivers, Delta, Enugu and Ogun follow. On the external front, states’ foreign debt climbed from $4.35 billion to $4.81 billion, with Lagos holding the largest share. Economists warn that rising wage bills, costly infrastructure projects and slow IGR growth are driving states back to the credit market. They urge stronger revenue mobilization, transparency and a shift from foreign loans to safeguard fiscal stability. A recent review shows FAAC allocations made up nearly three-quarters of revenue for most states, while IGR contributed only 26.2%. Lagos remains the outlier, generating 70% of its revenue internally.

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