States may pay more to borrow as financial records ‘go missing’

Nigerian states could face higher costs when seeking loans as gaps in the publication of their financial records make it harder for lenders and investors to determine how much they earn, spend and owe.

The warning comes as states are increasingly turning to borrowing to finance infrastructure and other government programmes, even though their financial information is not always being published on time or in sufficient detail.

In simple terms, lenders want to know whether a state can repay a loan before giving it money. When important information about a state’s revenue, expenditure, existing debts and budget implementation is unavailable, lenders may consider the state riskier and demand higher interest rates.

This could make borrowing more expensive for states and leave them with less money for roads, healthcare, education and other projects because a larger portion of their revenue would go into servicing debt.

The concern is particularly relevant as states are enjoying higher allocations from the federation account but are also returning to the debt market to raise additional funds.

According to BudgIT’s 2026 Half-Year Budget Implementation Report Status and Comparative Insights, only 34 states had published the required budget implementation information in the second quarter of 2026, compared with 35 states in the same period of 2025. Rivers was listed as non-compliant, while Osun joined the list in the second quarter.

Budget implementation reports are important because they show how much of an approved budget a government has actually spent and what it spent the money on.

Without such information, it becomes more difficult for citizens, lenders, investors and credit-rating agencies to assess a state’s financial position.

BudgIT’s second-quarter 2026 States Fiscal Transparency League also assessed the 36 states based on the availability and completeness of key financial documents, functioning e-procurement portals and fiscal data repositories.

The transparency problem is not limited to budget reports.

In September, BudgIT excluded Akwa Ibom and Rivers from an assessment of states’ post-subsidy finances because the states had not provided complete budget implementation records needed for the analysis.

Analysts say the issue goes beyond accountability to ordinary citizens.

Poor financial disclosure can directly affect the price states pay for money.

When a government consistently publishes clear and timely accounts, lenders have more information with which to assess its ability to repay.

But where financial information is ‘missing’ (incomplete), investors may demand a higher return to compensate for the additional uncertainty.

For the states, this means that improving financial transparency could become increasingly important as they seek fresh loans.

The development also comes against the background of relatively high borrowing costs in Nigeria’s domestic debt market. For instance, the Federal Government’s 364-day Treasury Bill closed at a 17.70 per cent stop rate in July, with the implied yield estimated at about 21.51 per cent.

With states competing for funds in the same financial environment, weak disclosure could make access to affordable credit even more difficult.

The implication is that publishing complete budgets and financial reports is not merely a bureaucratic requirement.

It can influence how much states pay to borrow and, ultimately, how much public money remains available for development.

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