Despite Higher FAAC Allocation, Lagos, Rivers, Eight Others Owe ₦2.48tn

…Debt Underscores Persistent Fiscal Pressures Facing State Govts

Lagos, Rivers, and Delta states have emerged as the top three most indebted states in Nigeria as of the first quarter of 2025, according to fresh debt figures collated from official data.

THE WHISTLER analysis showed that the combined debt stock of the ten most indebted states stood at ₦2.48tn as of March 31, 2025, despite significant monthly allocations from the Federation Account Allocation Committee.

Lagos retained its position as the state with the highest domestic debt, with obligations totalling ₦874.04bn. Rivers followed with ₦364.39bn, while Delta ranked third with ₦204.72bn.

Ogun State was in fourth place with ₦190.14bn, narrowly ahead of Enugu’s ₦188.42bn. Niger and Bauchi states recorded debts of ₦143.75bn and ₦142.40bn, respectively.

Benue, Imo, and Akwa Ibom rounded off the list with debts of ₦129.82bn, ₦122.09bn, and ₦118.21bn, respectively.

The figures highlight the persistent fiscal pressures facing sub-national governments, many of which rely heavily on borrowings to finance infrastructure and meet recurrent obligations.

During the first four months of this year, the Federation Account recorded a total revenue inflow of N10.2tn despite the drop in crude oil prices.

This is based on figures obtained from the Federation Account Allocation Committee.

The remittances were made by the Federal Inland Revenue Service, the Nigerian Customs Service, and other revenue-generating agencies of government.

Out of this amount, N6.58tn was disbursed as statutory allocations to the Federal Government, 36 states, and 774 local government areas from January to March.

The FAAC committee, headed by the Minister of Finance, Mr Wale Edun, is made up of commissioners for finance from the 36 states of the federation, the Accountant General of the Federation, and representatives of the Nigerian National Petroleum Company Ltd.

Others are representatives of the Federal Inland Revenue Service, the Nigeria Customs Service, the Revenue Mobilisation, Allocation and Fiscal Commission and the Central Bank of Nigeria.

The federation account is currently being managed on a legal framework that allows funds to be shared under three major components – statutory allocation, Value Added Tax distribution, and allocation made under the derivation principle.

Under statutory allocation, the Federal Government gets 52.68 per cent of the revenue shared; states, 26.72 per cent; and local governments, 20.60 per cent.
The framework also provides that VAT revenue be shared thus: the FG, 15 per cent; states, 50 per cent; and the LGs, 35 per cent.

Similarly, extra allocation is given to the nine oil-producing states based on the 13 per cent derivation principle.

Monthly analysis of the allocation showed that in January, total revenue stood at N2.641tn, with N1.703tn allocated. From this amount, the federal government received N552.59bn, state governments got N590.61bn, and local governments received N434.56bn. Oil-producing states shared N125.28bn under the derivation fund.

In the month of February, revenue dropped slightly to N2.344tn, with N1.678tn distributed to the three tiers of government.

Out of this amount, the federal government received N569.65bn, states got N562.19bn, while local governments received N410.56bn. The derivation fund allocated to oil-producing states stood at N136.04bn, the highest monthly figure in the quarter.

In the month of March, total revenue rose again to N2.411tn, but only N1.578tn was disbursed.

Out of this amount, the federal government received ₦528.69bn, states got ₦530.45bn, and local governments received ₦377bn. Derivation fund payments totalled N132.61bn.
For the month of April, revenue dropped to N2.8tn, while the sum of N1.68tn was shared among the three tiers of government.

From the N1.68tn allocation, the federal government received a total sum of N565.3bn, State governments received N556.74bn, while the local government council received N406.627bn.

In addition, the sum of N152.55bn, being 13 per cent of mineral revenue, was shared with the benefiting State as derivation revenue.

FAAC attributed the increased revenue performance to improved oil receipts, enhanced tax collection efforts, and gains from the foreign exchange market.

THE WHISTLER had reported that an economist and Managing Director of Financial Derivatives Company Limited, Bismarck Rewane, had cautioned that Nigeria could face increasing borrowing costs unless the Tinubu administration adopts a more strategic and results-oriented approach to debt management.

Rewane urged the federal government to prioritise efficiency and impact in its borrowing decisions.

“We need to be very intentional, very strategic and focused on what we are borrowing for—to generate revenue and have an impact—so that people can begin to reap the dividends of reforms and democracy,” Rewane said, stressing that the current borrowing trajectory must be aligned with measurable economic returns.

Rewane explained that Nigeria’s access to affordable financing is becoming increasingly uncertain due to delayed global interest rate cuts.

“We were anticipating borrowing under the assumption that interest rates would fall, easing the debt service burden. But with the delay in rate cuts until late 2025 or beyond, Nigeria may now be forced to raise funds at higher rates than originally expected,” he said.

The implication, he noted, is that the government must become more prudent and selective with its borrowing, ensuring that all new loans are tied to revenue-generating or economically productive projects.

“What are we borrowing for? Are those budgets going to generate enough revenue to service those debts? Those are the key elements,” he warned.

Despite Higher FAAC Allocation, Lagos, Rivers, Eight Others Owe ₦2.48tn is first published on The Whistler Newspaper