In the bustling streets of Kaduna, the echoes of market traders bargaining mix with the hum of generators, each scene telling its own quiet story of resilience.
But behind the noise lies a silent crisis, one that the Nigeria Extractive Industries Transparency Initiative (NEITI) says is draining the lifeblood from state development.
NEITI’s latest Policy Brief, “Beyond Federal Allocations: The Cost of Borrowings and Debt Servicing at State Level in Nigeria”, reads like both a warning siren and a call to action.
Its findings are stark: Kaduna, Ogun, Bauchi, and Cross River are diverting between one-tenth and nearly one-third of their monthly Federation Account Allocation Committee (FAAC) inflows to service debts.
For Kaduna, the picture is particularly sobering. In 2024 alone, 32.06% of its gross allocation, a hefty ₦51.2 billion out of ₦159.73 billion, never reached its people. Instead, it went straight to creditors.
Ogun followed with 27%, Bauchi 26%, and Cross River 24%.
In these states, the roads that could have been built, hospitals that could have been equipped, and schools that could have been staffed remain stalled, sacrificed to past borrowing.
“Debt, when managed efficiently, can be a tool for financing development at the grassroots,” said Dr. Ogbonnaya Orji, NEITI’s executive secretary. “But when servicing obligations consume up to a third of monthly revenues, it becomes a threat to the future of public service delivery and economic stability.”
The agency’s research, grounded in its statutory mandate under the NEITI Act 2007 and aligned with global EITI Standards, lays bare the hidden costs of poor fiscal discipline.
It shows how heavy deductions at source shrink the “fiscal space” available for grassroots investment, a phenomenon NEITI describes as a “silent fiscal emergency.”
The contrast between high-debt and low-debt states is telling. While Kaduna battles with a third of its funds gone before arrival, states like Borno (2.63%), Jigawa (2.74%), and Anambra (4.54%) retain over 95% of their allocations for direct development, thanks to prudent borrowing and tighter fiscal controls.
Beyond the numbers, NEITI’s brief warns of contractual landmines, debts linked to opaque public-private partnerships, such as ₦6 billion in Ogun and ₦7.73 billion in Ondo, which could lock states into long-term deductions with little public scrutiny.
In contrast, 18 states, including Abia, Adamawa, and Akwa Ibom, report zero such deductions, demonstrating that caution, or strategic timing, can avert future fiscal traps.
The report also shines a light on inequalities in Nigeria’s revenue-sharing formula. In 2024, Delta State received ₦581.27 billion, more than five times Nasarawa’s ₦108.32 billion.
For smaller-allocation states already saddled with high debt servicing, this imbalance threatens to widen the gap in infrastructure, jobs, and public welfare.
To avert a deeper fiscal crisis, NEITI recommends bold measures:
- Establish Debt Management Offices in all states.
- Enforce real-time debt reporting and quarterly public disclosures.
- Tie federal bailouts to improvements in internally generated revenue and transparency.
- Cap contractual deductions and publish full borrowing terms.
- Revise the revenue allocation formula to correct vertical and horizontal imbalances.
“This is not a name-and-shame exercise,” Dr. Orji insisted. “It is a mirror to reflect fiscal realities, and a map to guide states toward resilience, transparency, and equitable growth.”
In the end, NEITI’s message is clear: Nigeria’s states cannot afford to let debt dictate their destiny. The choice is stark, embrace fiscal discipline now or face a future where the bulk of public funds serve creditors instead of citizens.
The full Policy Brief has been shared with the Presidency, National Assembly, state finance commissioners, and the Governors’ Forum, and is now in the public domain.
Whether it sparks reforms or fades into another unread policy file will determine if this silent crisis becomes an economic landslide.
