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Nigerian subnational debts have spiked by 38.1%, growing from ₦7.25 trillion in 2022 to a substantial ₦10.01 trillion in 2023, as highlighted in BudgIT's 2024 State of States report.
Released Tuesday, October 29, the report warns of mounting debt crises across Lagos, Kaduna, and Edo, with exchange rate pressures worsening states' debt burdens.
According to BudgIT, the increase in debt stems from domestic and foreign obligations. Domestic debt rose significantly, adding ₦606.12 billion to reach a total of ₦5.86 trillion, while foreign debt increased by 4.1%, rising from $4.43 billion to $4.61 billion.
"The liberalisation of the exchange rate has sharply raised states' foreign debt repayments, amplifying the financial burden," BudgIT highlighted, urging caution in borrowing strategies.
Lagos State stands as the most indebted region, responsible for a notable 26.9% of the national foreign debt, totalling $1.24 billion.
BudgIT's analysis draws attention to Lagos' heavy debt reliance as a concerning trend given the volatile exchange rate, which shifted from ₦899.39 to ₦1,492.9 per dollar between December 2023 and June 2024.
This depreciation has left states with a significant repayment variance of ₦2.74 trillion.
BudgIT further identifies Kaduna and Edo as states with high foreign debt exposure—86.06% and 60.54% of their total debts, respectively, are in foreign currency.
This dependency exacerbates their financial vulnerability amidst fluctuating exchange rates.
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The report stresses the urgency for states to "curtail their appetite for foreign loans" and to bolster domestic revenue streams.
It also calls for fiscal reforms and high-impact, transparency-focused projects to address looming budgetary challenges.
"Debt sustainability requires clear frameworks for accountability, transparency, and a focus on domestic revenue mobilisation," BudgIT concluded.