By Favour Pius
Nigeria’s subnational debt profile climbed to N4.36 trillion in 2025, with Lagos State accounting for the largest share at N1.04 trillion, underscoring mounting fiscal pressures on state governments amid constrained revenues.
The latest figures highlight a steady increase in borrowing by states, driven largely by infrastructure financing needs, wage obligations and declining internally generated revenue in some regions.
Analysts said Lagos’ position as the most indebted state reflects its expansive economic base and aggressive infrastructure drive, which has required sustained access to both domestic and external financing.
However, they warned that the rising debt burden across states could heighten fiscal vulnerabilities, particularly for those with weaker revenue bases and limited capacity to service obligations.
Data indicates that while some states have leveraged borrowing to fund capital projects, others continue to rely on loans to meet recurrent expenditures, raising concerns over long-term sustainability.
Economic experts stressed the need for improved fiscal discipline, stronger revenue mobilisation and transparency in debt utilisation to ensure that borrowed funds translate into measurable economic growth.
They also called for stricter oversight by federal authorities, including the Debt Management Office, to ensure compliance with borrowing limits and sustainability thresholds.
The rising debt levels come at a time when states are grappling with inflationary pressures and increased spending demands, further tightening fiscal space.
Financial analysts noted that while subnational borrowing is not inherently problematic, the structure, cost and utilisation of such debt remain critical in determining its impact on economic stability.
As scrutiny intensifies, stakeholders are urging state governments to prioritise revenue-generating projects, deepen tax reforms and adopt prudent debt management strategies to avoid future fiscal distress.
