FCT domestic debt surges more than six-fold in one year

…as 11 subnationals add N654bn in 12 months

The Federal Capital Territory (FCT) led a sharp increase in subnational debt, as its domestic debt skyrocketed by 538 percent amidst a broader borrowing spree that saw 10 states, alongside the FCT accumulate over N654 billion in fresh debt from March 2025 to March 2026.

According to the states’ domestic debt data published by the Debt Management Office (DMO), the aggregate domestic debt of the 36 states and the FCT grew from N3.86 trillion in March 2025 to N4.52 trillion in March 2026.

BusinessDay’s analysis of the data showed that while several states achieved a reduction in their domestic debt profiles, 10 states—including Bauchi, Borno, Cross River, Delta, Kaduna, Nasarawa, Ogun, Yobe, and the FCT—accumulated more debt in the period.

The FCT topped the list of borrowers, growing its debt from N61.12 billion in 2025 to N389.87 billion in 2026, representing a 538 percent increase. This was followed by Kaduna State, whose debt grew by 251.3 percent from N25.00 billion in 2025 to N87.86 billion in 2026.

Yobe State also recorded a significant increase in its domestic debt profile, which grew from N39.62 billion to N98.59 billion in 2026.

However, Lagos State recorded the highest overall debt balance, which grew from N874.04 billion in 2025 to N1.21 trillion in 2026.

Bauchi State’s debt increased from N142.40 billion in 2025 to N154.45 billion in 2026; Borno’s debt increased from N25.09 billion in 2025 to N88.43 billion; and Cross River increased its debt from N115.11 billion in 2025 to N132.30 billion in 2026.

Delta State’s debt also increased marginally from N204.72 billion to N213.85 billion in 2026; Jigawa’s debt climbed from N1.06 billion to N1.60 billion; Nasarawa State’s debt grew from N24.72 billion to N27.15 billion; and Ogun State grew its debt from N190.13 billion as of March 2025 to N200.74 billion in 2026.

The remaining 26 states recorded declines in their domestic debt profiles.

On the external front, aggregate debt for the 36 states and the FCT stood at $5.68 billion. Of this total, Lagos accounted for the highest profile at $1.17 billion.

Other states with high external debt profiles in the period include Kaduna ($684.29 million), Edo ($354.03 million), Cross River ($222.92 million), Bauchi ($220.56 million), Ogun ($216.99 million), and Katsina ($200.62 million).

These seven states accounted for 54 percent of total subnational external debt.

Speaking to BusinessDay on the debt profile, Mayowa Amoo, Chief Executive Officer of QLP Capital, said that while strategic public borrowing remains essential for funding Nigeria’s massive infrastructure gap, state governments must ensure loans directly spur economic expansion and generate long-term tax revenues.

According to Amoo, public debt should not be viewed negatively if it is deployed systematically into wealth-generating sectors. Drawing a parallel to a family taking out a mortgage rather than watching rising inflation erode their savings, he noted that targeted borrowing allows the nation to jump ahead and bridge critical developmental deficits faster than revenue generation alone would allow.

“The economy expands because there are also other things that go along with logistics. So, what you use the money for is more important than the fact that you’re just borrowing,” Amoo said. “If you borrow and use the money to generate more wealth and goods, that means you’ll be able to generate more taxes as a government, which is the major source of debt repayment.”

However, Amoo cautioned that borrowing becomes a waste of national resources if projects fail to deliver growth or lack long-term operational management.

He warned that a breakdown in infrastructure service delivery disrupts the revenue loop, forcing the government into a vicious cycle of unsustainable debt. He also urged policymakers to maintain fiscal discipline to safeguard Nigeria’s international credit position.

“Our credit rating is improving, and international lenders are happy to lend to us because we are doing the right things in terms of reform,” he said. “But if we go too aggressive and find ourselves back in problems, our credit rating will be diminished, and we will be locked out of the capital markets.”

Amoo called for a systematic and traceable debt strategy, emphasizing that long-term asset management is as critical as securing the initial funding.

Also commenting on the trend, Uzor Joseph, economic expert and Executive Director at Frontline Investments, noted that the upward debt trajectory underscores an urgent mandate for states to aggressively expand their internally generated revenue (IGR) bases.

He explained that long-term solvency hinges on a state’s ability to mobilize revenues internally by effectively leveraging natural resource endowments, technology, public-private partnerships, human capital, and effective consequence management.

“This capacity is crucial for financing essential infrastructure, investing in human capital development, meeting the new minimum wage and its consequential adjustments, and repairing the fractured social contract,” Joseph said.

“To achieve debt sustainability, states must also curb their reliance on foreign loans, especially in light of exchange rate volatility, to minimize exposure to unfavorable rates. Additionally, states should establish robust frameworks for transparency, ensuring borrowed funds are allocated to high-impact projects with clear economic returns,” he said.

Ishaq Ibrahim, an Abuja-based economist, said that despite the significant increase in statutory allocations, states have been unable or unwilling to fund their ambitions solely through their increased share of the Federation Account.

Ibrahim said that while the federal government has encouraged states to invest bumper allocations from the Federation Account into productive sectors to cushion the effect of reforms, the return to borrowing suggests many states remain stuck in a cycle of deficit financing.

He suggested that the implementation of the new minimum wage and the skyrocketing cost of infrastructure projects may be the primary drivers forcing states back into the credit market.

“This revenue-debt paradox raises urgent questions about fiscal discipline, as surging inflows intended to provide a social safety net are increasingly swallowed by rising debt-servicing costs and a renewed appetite for commercial loans,” he added.

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