The Nigeria Extractive Industries Transparency Initiative (NEITI) has issued a serious warning: excessive debt servicing by states is quietly draining funds needed for essential services and infrastructure. In its latest report, NEITI calls this a “silent fiscal emergency,” urging states to adopt more responsible borrowing and transparent financial management.
The Cost of Debt
- Significant Deductions: NEITI’s report found that between 10 per cent and 30 per cent of monthly allocations from the federal government are being deducted directly to service state debts. These funds, which largely come from oil and gas revenues, are meant for grassroots development.
- High-Debt States:
- Kaduna leads the 2024 list with 32.06 per cent of its allocation (N51.2 billion) going to debt servicing.
- Other high-debt states include Ogun (27%), Bauchi (26%), and Cross River (24%).
- Low-Debt States:
- States with lower debt, such as Borno (2.63%), Jigawa (2.74%), and Benue (3.58%), have kept over 95% of their allocations for direct investment.
Hidden Liabilities and Recommendations
NEITI also highlighted hidden debts from public-private partnership (PPP) projects, noting that states like Ogun (N6 billion) and Ondo (N7.73 billion) have large contractual liabilities that further reduce their available funds.
To address this crisis, NEITI recommends several reforms:
- Establish State Debt Management Offices.
- Require mandatory, real-time debt reporting and quarterly public disclosures.
- Link federal bailouts to states improving their internally generated revenue.
- Revise the revenue allocation formula to reduce financial inequality between states.
Orji Ogbonnaya Orji, NEITI’s Executive Secretary, stated that this is not a “name-and-shame exercise” but a call to action. He stressed that while debt can drive development, it becomes a “threat to public service delivery” when it consumes up to a third of a state’s revenue.
