Seven state governments increased their domestic debt stocks by a combined N355.18bn in the first quarter of 2026, despite repeated claims by some governors that they had not contracted fresh loans to meet the financial needs of their administrations.
The increase, however, was concentrated in only seven sub-national governments, while 29 recorded reductions in their domestic debt stocks between December 31, 2025 and March 31, 2026, according to data obtained from the Debt Management Office and analysed by The PUNCH on Monday.
Further findings showed that the total debt stock of the seven states during the period under review was N977.15bn.
The DMO data showed that the domestic debt stock of the 36 states and the Federal Capital Territory rose from N4.36tn at the end of December 2025 to N4.52tn as of March 31, 2026. That represents a net increase of N163.25bn, or 3.74 per cent, within three months.
But the gross increase recorded by the seven governments whose debt stocks went up was much higher, at N355.18bn. The seven governments that recorded increases were the Federal Capital Territory, Edo, Borno, Yobe, Benue, Kaduna and Nasarawa.
The FCT recorded by far the largest increase, with its domestic debt stock rising from N188.86bn to N389.88bn, an increase of N201.01bn or 106.43 per cent. Edo followed, with its debt stock jumping from N91.18bn to N172.37bn, an increase of N81.19bn or 89.04 per cent.
Borno recorded a 107.40 per cent increase, with its domestic debt rising from N42.64bn to N88.44bn, representing an addition of N45.80bn. Yobe’s debt stock rose from N81.00bn to N98.59bn, an increase of N17.60bn or 21.73 per cent.
Benue increased its debt stock by N5.62bn, from N107.23bn to N112.85bn, representing a 5.24 per cent rise. Kaduna recorded an increase of N3.22bn, moving from N84.64bn to N87.87bn, a 3.80 per cent rise.
Nasarawa recorded the smallest increase among the seven, with its debt stock rising by N743.55m, from N26.41bn to N27.15bn, representing a 2.82 per cent increase.
The development came despite a substantial increase in allocations from the Federation Account to state governments in the first quarter.
An analysis of FAAC disbursements put the total allocations to the 36 states in the first quarter of 2026 at about N2.49tn, compared with about N1.98tn in the corresponding period of 2025. That represents an increase of roughly N510bn, or 25.8 per cent.
The higher allocation was driven significantly by VAT and other improved revenue inflows following reforms to the country’s tax and revenue-sharing system.
FAAC data showed that states received N651.53bn from January revenue but shared in February 2026 allocation and N657.60bn from the March allocation. The March distribution alone rose from N1.894tn to N2.036tn for the three tiers of government, while states received N657.60bn.
The increase in state revenues makes the rise in debt stocks particularly significant, as it raises questions about whether higher federal transfers are translating into lower borrowing requirements across all sub-national governments.
However, the debt figures do not by themselves establish that the affected states contracted new loans during the quarter. A rise in debt stock can result from fresh borrowing or drawdowns, but it can also reflect other changes in outstanding obligations.
Kaduna State under the leadership of Governor Uba Sani provides one of the clearest examples of the difference between fresh borrowing and an increase in reported debt stock.
At the beginning of January, the Kaduna State Government denied reports that the administration was borrowing to finance its 2026 budget. The Commissioner for Planning and Budget, Mukhtar Monrovia, said the state’s budget would be financed through statutory allocations, internally generated revenue and grants.
He also explained that the loan drawdown contained in the budget related to facilities obtained by previous administrations.
He said, “Previous administrations had collected loans, and the state is drawing down from them, but no new loans have been collected by the Governor Uba Sani Government.”
The commissioner further explained why the administration was continuing with the existing facilities, noting, “terminating the loan agreements prematurely will lead to penalties higher than the cost of interest repayments on servicing the loans.”
He added, “Despite immense financial pressures, the administration of Uba Sani has continued to service the loan commitments for both principal and accrued interest negotiated and taken by the previous administration.”
The clarification was made after the 2026 budget’s loan drawdown component was interpreted as evidence of fresh borrowing.
Yet, the DMO figures supplied for this analysis show Kaduna’s domestic debt stock increased from N84.64bn at the end of 2025 to N87.87bn at the end of March. The N3.22bn increase represents 3.80 per cent.
The figures therefore do not necessarily contradict the governor’s claim of no new loan contracted, but they demonstrate that Kaduna’s outstanding domestic debt increased during the three-month period.
That distinction is important because a state can record a higher debt stock without its incumbent administration having signed a completely new loan agreement during the period.
Delta State presents a contrasting picture. Governor Sheriff Oborevwori has repeatedly said his administration has not borrowed to finance its projects.
In May, he said, “We are here to thank God for the wisdom to execute development projects all over the state without borrowing a kobo from anybody or bank. Every contract that we give out, the money is available. We have constantly discharged our obligations to our contractors.”
The governor made the statement while marking three years in office and attributed the state’s development projects to prudent management of available resources.
The DMO figures lend some support to the administration’s position on the direction of its debt stock. Delta’s domestic debt fell from N248.83bn in December 2025 to N213.85bn by March 2026. That represents a reduction of N34.98bn or 14.06 per cent.
The state therefore recorded the largest absolute reduction among the 36 states and FCT during the period. The decline also means that Delta’s debt stock at the end of March was N34.98bn lower than it was only three months earlier.
The reduction is notable because Delta remains one of the most indebted sub-national governments in nominal domestic-debt terms. It ranked behind only Rivers and Lagos among the states in the March 2026 data, with N213.85bn outstanding.
The Delta government also said in June that it had spent N664.5bn on 362 contracts in 2025 without borrowing
Kano also recorded a reduction rather than an increase. The state’s domestic debt declined from N53.75bn at the end of 2025 to N52.46bn by March 2026. That is a fall of N1.29bn or 2.40 per cent.
The decline came after the Kano State Government rejected claims that Governor Abba Kabir Yusuf was financing his administration’s projects with loans. In February, the Commissioner for Budget and Planning, Musa Sulaiman Shanono, said, “Governor Abba Kabir Yusuf has not borrowed any loans, either domestically or internationally, to execute projects since assuming office.”
The commissioner said the government’s extensive projects and empowerment programmes had been funded from internally available resources. Kano’s debt movement is therefore materially different from Kaduna’s.
While Kaduna’s outstanding domestic debt increased by N3.22bn during the quarter, Kano reduced its debt by N1.29bn. The comparison does not by itself establish the source of the changes, but it provides an important fiscal distinction between the two states.
Anambra recorded an even sharper decline. The state’s domestic debt stock fell from N11.55bn in December to N9.62bn in March. The N1.93bn reduction represents 16.74 per cent.
Anambra has been one of the most vocal states in promoting a conservative approach to borrowing. Governor Chukwuma Soludo has repeatedly said his administration would not borrow to fund consumption or routine expenditure.
In explaining his position on borrowing, Soludo said, “It might make sense to borrow today to provide goods and services, with the expectation that tomorrow the economy will generate resources to pay back.”
He added, “Let’s be clear, this administration under my watch has a particular view about borrowing, and we have very stringent criteria for it.” The governor also said, “In 2022, the State House of Assembly approved borrowing N100bn for a supplementary budget, but to this moment, we have not borrowed a kobo of that amount.”
He said the state’s borrowing policy was limited to projects capable of generating returns. “The reason is simple: we are working on projects and programmes that will be bankable. We insist on borrowing only for bankable projects that have a high probability of generating returns to repay the debt.”
Although those remarks predate the 2026 debt figures, they provide the background to Soludo’s no-borrowing policy. The latest DMO figures show that Anambra’s domestic debt continued to move downward in the first quarter.
Akwa Ibom also recorded a reduction. Its domestic debt stock fell from N84.85bn to N83.63bn, a decline of N1.22bn or 1.44 per cent. The development followed the state government’s debt-reduction drive.
In March, the Umo Eno administration announced that it had cleared N39.83bn in outstanding bank debts. While the Akwa Ibom case is not a direct denial of fresh borrowing like those of Kaduna, Kano and Delta, it adds to the emerging picture of some states using improved revenues to reduce outstanding liabilities rather than expand them.
Despite the movements recorded during the quarter, Lagos remained by far the state with the largest domestic debt stock. Its debt fell from N1.219tn to N1.205tn. The reduction of N14.41bn represents 1.18 per cent.
Lagos alone accounted for more than one-quarter of the combined domestic debt of the 36 states and the FCT. Rivers followed with N362.43bn, down N16.37bn or 4.32 per cent from N378.81bn.
Delta was third at N213.85bn, followed by Ogun at N200.75bn and Edo at N172.37bn. Bauchi’s N154.45bn, Niger’s N140.69bn, Cross River’s N132.30bn, Enugu’s N120.03bn and Benue’s N112.85bn completed the group of states with more than N100bn in domestic debt.
The DMO figures show that the increase in the aggregate debt stock was not a broad-based borrowing spree. Of the 37 sub-national entities covered, seven recorded increases, 29 recorded reductions and one, Jigawa, remained unchanged.
The 29 reductions totalled N191.93bn. This was enough to offset more than half of the N355.18bn increase recorded by the seven governments. Consequently, the overall debt stock rose by N163.25bn, rather than the full N355.18bn.
The figures suggest a highly uneven fiscal picture. Some governments were accumulating higher domestic obligations while others were paying down existing debts.
The FCT, Edo and Borno accounted for N327.998bn, or about 92.3 per cent, of the N355.18bn increase recorded among the seven governments.
That concentration is particularly striking. The FCT alone accounted for N201.01bn of the increase, while Edo contributed N81.19bn and Borno N45.80bn.
A comprehensive analysis of each state borrowing data showed that Abia’s debt stock fell marginally from N48.41bn to N48.32bn, a reduction of N91.02m or 0.19 per cent, leaving its debt position virtually unchanged. Adamawa reduced its domestic debt from N67.03bn to N64.70bn, cutting N2.33bn or 3.48 per cent from its outstanding obligations.
Akwa Ibom State’s debt fell from N84.85bn to N83.63bn, a reduction of N1.22bn or 1.44 per cent. The decline came amid the state government’s reported efforts to clear outstanding bank obligations. Anambra recorded one of the sharpest percentage reductions, cutting its debt from N11.55bn to N9.62bn. The N1.93bn reduction represented 16.74 per cent.
Bauchi’s debt declined from N156.05bn to N154.45bn, representing a reduction of N1.60bn or 1.03 per cent. Despite the fall, it remained above N150bn. Bayelsa reduced its debt from N51.38bn to N50.17bn, cutting N1.22bn or 2.36 per cent.
Benue was among the states whose debt increased. Its stock rose from N107.23bn to N112.85bn, an increase of N5.62bn or 5.24 per cent. Similarly, Borno recorded one of the biggest increases, with its debt more than doubling from N42.64bn to N88.44bn. The N45.80bn increase represented 107.40 per cent.
Cross River’s debt fell from N137.36bn to N132.30bn, a reduction of N5.05bn or 3.68 per cent. Delta recorded one of the largest debt reductions, cutting its stock from N248.83bn to N213.85bn. The N34.98bn decline represented 14.06 per cent. The reduction is notable against Governor Sheriff Oborevwori’s repeated claim that his administration has not borrowed to execute projects.
Ebonyi reduced its debt from N13.48bn to N12.30bn, representing a fall of N1.18bn or 8.76 per cent. Edo recorded the largest increase among the states. Its domestic debt surged from N91.18bn to N172.37bn, adding N81.19bn or 89.04 per cent in three months. Ekiti’s debt declined from N43.94bn to N43.04bn, a reduction of N898.19m or 2.04 per cent.
Enugu recorded the largest percentage and absolute reduction among the states, cutting its debt from N157.60bn to N120.03bn. The N37.57bn decline represented 23.84 per cent. Gombe’s debt fell from N67.20bn to N65.17bn, a reduction of N2.03bn or 3.02 per cent. Imo reduced its domestic debt from N83.75bn to N81.65bn, representing a N2.10bn or 2.50 per cent decline. Jigawa’s debt remained unchanged at N1.60bn, making it the only state with no movement in its domestic debt stock during the period.
Kaduna’s debt increased from N84.64bn to N87.87bn, adding N3.22bn or 3.80 per cent. Kano reduced its debt from N53.75bn to N52.46bn, a decline of N1.29bn or 2.40 per cent. Katsina cut its debt from N14.11bn to N12.69bn, representing a N1.42bn or 10.05 per cent reduction. Kebbi’s debt also declined marginally from N14.71bn to N14.58bn, a reduction of N134.56m or 0.91 per cent. Kogi reduced its debt from N27.95bn to N26.84bn, cutting N1.11bn or 3.99 per cent.
Kwara’s debt fell from N62.99bn to N56.91bn, representing a reduction of N6.08bn or 9.65 per cent. However, Lagos remained the most indebted state despite reducing its debt from N1.219tn to N1.205tn. The N14.41bn reduction represented 1.18 per cent, leaving Lagos with more than three times the domestic debt of Rivers, the next-highest state. Nasarawa’s debt rose from N26.41bn to N27.15bn, an increase of N743.55m or 2.82 per cent.
Niger reduced its debt from N142.67bn to N140.69bn, cutting N1.98bn or 1.39 per cent. Ogun recorded a substantial reduction, with its debt falling from N227.47bn to N200.75bn. The N26.72bn decline represented 11.75 per cent, although it remained the fourth-most indebted state. Ondo reduced its debt from N8.42bn to N7.31bn, representing a N1.10bn or 13.10 per cent decline.
Osun’s debt fell from N80.28bn to N79.19bn, a reduction of N1.09bn or 1.36 per cent. Oyo cut its domestic debt from N77.42bn to N69.78bn, reducing its obligations by N7.63bn or 9.86 per cent.
Plateau’s debt declined from N67.50bn to N64.37bn, representing a N3.13bn or 4.64 per cent reduction. Rivers remained the second-most indebted state after Lagos, although its debt fell from N378.81bn to N362.43bn. The N16.37bn reduction represented 4.32 per cent. Sokoto reduced its debt from N47.39bn to N44.28bn, cutting N3.11bn or 6.57 per cent.
Taraba’s debt fell from N85.51bn to N80.92bn, representing a N4.59bn or 5.36 per cent decline. Yobe recorded a significant increase, with its debt rising from N81bn to N98.59bn. The N17.60bn increase represented 21.73 per cent and pushed the state’s obligations close to the N100bn mark. While Zamfara recorded one of the largest percentage reductions, cutting its debt from N57.04bn to N47.48bn. The N9.57bn decline represented 16.77 per cent.
The Federal Capital Territory recorded the largest absolute increase by far. Its domestic debt more than doubled from N188.86bn to N389.88bn, an increase of N201.01bn or 106.43 per cent. The FCT alone accounted for more than half of the gross increase recorded by the seven states and the FCT whose debt stocks rose.
Meanwhile, the debt movement is coming at a time when states have enjoyed significantly improved inflows from the Federation Account.
FAAC distributed N1.894tn among the three tiers for February 2026, including N651.53bn to state governments. For March, the total distributable revenue rose to N2.036tn, with N657.60bn going to states.
The March allocation included N1.32tn in distributable statutory revenue, N515.39bn from VAT and N200bn in augmentation. States received N320.69bn from the statutory component, N283.47bn from VAT and N53.44bn from the augmentation.
The April revenue allocation was even higher. FAAC later distributed N2.257tn from April revenue, with state governments receiving N772.36bn. The distributable pool included N1.26tn in statutory revenue, N747.09bn in VAT and N250bn in augmentation.
The improving revenue position has therefore provided states with more fiscal space than they had in previous years. But the DMO figures show that higher allocations have not produced a uniform reduction in state debt.
Instead, the experience has diverged. Some states are using the improved inflows to reduce their obligations, while others have recorded higher debt stocks.
The borrowing trend at the sub-national level mirrors the broader debt challenge facing the Federal Government. Nigeria’s total public debt stock rose to N159.35tn at the end of March 2026, representing an increase of almost N10tn within one year. The rise underscores the continued reliance on borrowing to finance government programmes and infrastructure despite efforts by some states to strengthen their internally generated revenue and reduce outstanding obligations.
During a recent media chat, the Chief Economist and Director of Research at the Nigerian Economic Summit Group, Dr Olusegun Omisakin, said the issue is not borrowing itself but how the funds are utilised.
“Without justifying borrowing, if you look at contemporary economies, you hardly see a significant difference in terms of borrowing levels. Nigeria is still relatively okay when you look at debt-to-GDP and debt-to-revenue indicators,” he said.
He, however, stressed that the real concern is the use of borrowed funds, noting, “The challenge is what we use the money for. If Nigeria borrows and you see the impact on infrastructure, nobody will really be concerned about the rate of borrowing.”
Similarly, a renowned economist and Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, said while borrowing may not be entirely avoidable, Nigeria must urgently rein in its rising debt profile and reduce reliance on loans through stronger revenue and fiscal discipline.
Yusuf said, “We need to work on the growth of our debt. We need to devise strategies to ensure that our debt levels are sustainable.” He noted that recent tax reforms could play a critical role in easing borrowing pressures if properly implemented.
Punch
