FAAC’s growing windfall fails to curb rollover of states’ loans, up to over N4trn – THISAGE

Nigerian states are increasing borrowing despite a sharp increase in allocations by the Federation Account Allocation Committee (FAAC), raising fresh concerns over fiscal sustainability and weak internally generated revenue (IGR) growth.

Recent data shows a reversal of the fiscal consolidation trend seen in 2024.

According to the National Bureau of Statistics (NBS), states’ domestic debt declined significantly from 5.8 trillion naira in December 2023 to 3.8 trillion naira by March 2025.

However, by September 2025, total subnational debt had once again risen to $4 trillion.

The highest domestic debt burdens were recorded in Lagos (N1.04 trillion), Rivers (N381 billion), Delta (N247 billion), Enugu (N194.7 billion) and Ogun (N168 billion).

External debt also increased from $4.349 billion to $4.811 billion by June 2025, with Lagos leading the way with $1.049 billion, followed by Kaduna, Edo, Ogun and Cross River.

This renewed loan comes amid a surge in FAAC disbursements since the Bola Tinubu administration began.

States received $2.80 trillion in 2022, but allocations have grown by more than 160% since then.

However, revenue data from Agora Policy highlights a structural weakness. Of the $6.05 trillion generated by 30 states in the first half of 2025, FAAC accounted for 73.8%, while IGR contributed only 26.2%.

Notably, 29 states derived between 70 and 95% of their revenues from FAAC, with Lagos the only outlier at 30%.

The trend highlights persistent fiscal dependence on federal transfers, limiting long-term resilience.

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