Nigerian states and the Federal Capital Territory (FCT) have seen their external debt surge to approximately $5.68 billion in 2025, an increase of nearly $1 billion, despite a rise in revenue from the Federation Accounts Allocation Committee (FAAC). This troubling trend raises significant questions about fiscal sustainability amid growing economic pressures.
The debt escalation occurs even as FAAC disbursements increased, suggesting that states may be relying excessively on external borrowing to finance recurrent expenditures rather than investing in long-term development. Critics argue that this could hinder future growth and exacerbate economic vulnerabilities. "Relying on debt for operational expenses is a recipe for disaster," warns Dr. Ayo Adeyemi, an economist and policy analyst.
As states grapple with the implications of their rising debt, the need for prudent fiscal management has never been more pressing. Policymakers must prioritize economic reforms to ensure that revenue growth translates into sustainable development. Without decisive action, the current trajectory could lead to a fiscal crisis that undermines the financial stability of Nigeria's regional governments.
