Nigeria’s subnational governments are in the midst of a serious financial crisis, as their overall debt increased from ₦7.25 trillion in 2022 to ₦10.01 trillion in 2023, a 38.1% increase.
The 2024 State of States study from BudgIT, which was made public on Tuesday, emphasizes this concerning tendency.
Domestic debt has increased dramatically, according to the study, adding ₦606.12 billion to the entire debt stock, which currently stands at ₦5.86 trillion.
The domestic debt grew at an average annual pace of 11.4%. In comparison, foreign debt grew from $4.43 billion in 2022 to $4.61 billion in 2023, a 4.1% increase.
The research claims that states are under more financial strain as a result of the exchange rate liberalization, which has resulted in a significant increase in their naira payback obligations for foreign loans.
With $1.24 billion, or 26.9% of the total foreign debt, Lagos State continues to be the most indebted state.
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According to a stark analysis, states are exposed to a substantial variance of N2.74 trillion in debt repayment obligations as a result of the exchange rate movement from N899.39 to N1,492.9 per dollar between December 2023 and June 2024. With 86.06% and 60.54% of their total debts in foreign currency, respectively, Kaduna and Edo states have the highest foreign debt ratios.
The report also lists current obligations, such as contractor arrears and pension debts, totaling ₦1.19 trillion.
BudgIT stressed the need for improved domestic revenue mobilization and fiscal reforms, advising states to reduce their thirst for foreign loans in the face of exchange rate volatility in order to achieve debt sustainability.
To maintain fiscal stability, the group advised nations to prioritize high-impact initiatives and set up frameworks for debt transparency.
