States’ borrowing surges amid naira devaluation, infrastructure push

The latest figures from Nigeria’s Debt Management Office (DMO) reveal a significant escalation in the external debt of states and the Federal Capital Territory (FCT), rising by 6.14% from $4.61 billion in December 2023 to $4.89 billion by June 2024.

This increase, however, masks a more dramatic shift when expressed in local currency terms, where the debt surged by 73.46%, from N4.15 trillion to N7.2 trillion. This spike followed the devaluation of the naira from N899.39/$1 in late 2023 to N1,470.19/$1 by mid-2024.

This trend points to an increased dependence on external borrowing by Nigerian states to finance vital infrastructure and public services.

Analysts warn that while such investments are crucial for development, the sustainability of this debt is a growing concern amid broader economic challenges, including dwindling revenue and currency instability.

Top 10 Most Indebted Nigerian States (as of June 2024)

10. Katsina State

Katsina experienced an unprecedented 125% surge in its foreign debt, climbing from $50.31 million to $112.98 million within six months. The $62.67 million increase is largely attributed to funding development projects in agriculture and rural infrastructure, crucial for supporting its agrarian-based economy.

9. Kano State

Kano’s external debt rose by 14%, from $107.92 million to $123.39 million. The $15.47 million increment is tied to efforts aimed at expanding industrial zones and enhancing trade infrastructure, integral to boosting its status as a commercial center in northern Nigeria.

8. Ekiti State

READ ALSO: Nigeria’s debt soars to N134.3trn, analysts warn of rising fiscal risks

Ekiti saw a 13% increase in foreign debt, which rose from $121.05 million to $136.64 million, reflecting an additional $15.59 million. This rise supports the state’s ongoing education and healthcare enhancements.

7. Ogun State

Ogun reported a slight decrease of 1% in its foreign debt, reducing from $168.83 million to $166.64 million. This $2.20 million reduction suggests successful debt management strategies and a shift toward leveraging internal revenue through industrial investments.

6. Bauchi State

Bauchi recorded a minor decline of 1%, with its debt falling from $187.63 million to $185.28 million, a reduction of $2.36 million. The state’s modest decrease is indicative of a more conservative fiscal approach aimed at managing its agricultural-based economy.

5. Rivers State

Rivers witnessed the highest nominal surge in external debt, soaring by 152% from $80.94 million to $203.81 million. This significant $122.86 million increase underlines the state’s reliance on foreign debt to fund infrastructure projects and economic activities.

4. Cross River State

Cross River maintained a stable debt level of $211 million, signaling a cautious approach to new borrowing as it focuses on balancing fiscal sustainability with development initiatives, notably in tourism and infrastructure.

3. Edo State

Edo experienced a 21% rise in foreign debt, which increased from $314.45 million to $380.97 million, adding $66.52 million. The state continues to leverage external debt for infrastructure and economic development.

2. Kaduna State

Kaduna’s external debt increased by 9%, from $587.07 million to $640.99 million, marking a $53.92 million uptick. The state’s reliance on external funds is seen in its commitment to advancing large-scale development projects.

1. Lagos State

Leading the chart, Lagos State’s foreign debt stood at $1.201 billion as of June 2024, a slight decline of 3% from $1.244 billion in December 2023.

This $42.80 million reduction indicates strategic repayments as part of efforts to manage its significant debt load, which is reflective of its extensive infrastructure investments such as road expansions and public transit systems.