States and local governments in Nigeria owed a combined ₦4.09 trillion to banks and the Central Bank of Nigeria (CBN) as of December 2024, according to the latest figures from the CBN’s quarterly statistical bulletin.
The data reflects a marginal decrease of ₦112 billion or 2.7% from ₦4.20 trillion recorded in December 2023—an indication of a slight improvement in the subnational debt landscape.
Commercial and merchant banks accounted for the largest share of the debt at ₦2.41 trillion (58.9% of the total), down from ₦2.64 trillion in December 2023, marking a ₦233 billion reduction. Conversely, debt owed to the CBN increased to ₦1.68 trillion in 2024 from ₦1.56 trillion in the previous year, accounting for 41.0% of total subnational liabilities.
The report also showed—for the first time—a ₦3.77 billion exposure from non-interest banks, while primary mortgage and microfinance banks had no outstanding claims on subnational entities.
Fluctuations in Monthly Debt Trends
The bulletin detailed noticeable shifts in monthly subnational borrowing. In January 2024, debt levels peaked at ₦4.29 trillion, reflecting a 20.01% year-on-year increase from ₦3.57 trillion in January 2023.
Debt dipped to ₦4.10 trillion in February, ₦4.09 trillion in March, and then fell sharply to ₦3.52 trillion in April, representing a 14.07% monthly drop and the only year-on-year decline of 5.68% for 2024.
Throughout the year, the CBN and commercial banks remained the primary sources of subnational credit. In January, the CBN accounted for ₦1.56 trillion (36.38%), while commercial and merchant banks held ₦2.73 trillion (63.62%). However, April saw a notable shift, with the CBN’s share rising to 45.17% and commercial banks’ exposure dropping to 54.71%, possibly due to reduced lending activity from private financial institutions.
Following April’s decline, borrowing rebounded in May by 14.74% to ₦4.04 trillion and climbed again in June to ₦4.29 trillion. From July to December, total claims remained consistently above ₦4 trillion.
Year-on-year increases were observed in most months, with February and March rising 12.96% and 11%, respectively. June posted the sharpest annual growth at 30.65%, with an increase of ₦1.01 trillion compared to June 2023.
By year-end, total debt stood at ₦4.09 trillion slightly lower than the previous December. Non-interest banks contributed minimally, with a constant ₦4.03 million until August, followed by a dip to ₦3.77 million in December.
The steady increase in the CBN’s share suggests growing dependence on the apex bank, particularly during periods of commercial banks’ credit tightening. Meanwhile, the decline in commercial bank exposure from ₦2.73 trillion in January to ₦2.41 trillion in December could indicate greater caution within the private banking sector amid inflationary pressures and aggressive monetary tightening by the CBN.
Experts Warn of Fiscal Risk, Urge Sustainable Reforms
Financial experts have expressed concern over the rising debt burdens of subnational governments and called for urgent fiscal reforms to ensure long-term sustainability.
Teslim Shitta-Bey, Director and Chief Economist at Proshare Nigeria LLC, warned that continued reliance on debt could undermine the fiscal health of both state and federal governments.
“The challenge here is that most of the governments, including the Federal Government, are unable to manage their balance sheets properly. While borrowing might seem like an easy way to run operations, it is not necessarily the right approach,” he told
Shitta-Bey advised against the default use of debt and suggested the adoption of innovative financing options. “Governments could consider longer-term debt structures that resemble equity, which might ae more beneficial in the long run,” he said.
He also advocated for the development of a comprehensive national asset register to enable better capital mobilization. Citing the National Stadium as an example of underutilized infrastructure, he emphasized the untapped potential of such assets.
In addition, Shitta-Bey called for increased use of state revenue bonds. “States need to focus on raising revenue bonds, instead of general obligation bonds,” he added.
Similarly, Lagos-based economist Adewale Abimbola linked the fragile fiscal state of many subnationals to their lack of economic viability and overdependence on federal allocations.
According to him, “Most states are not economically viable and depend heavily on disbursements from the Federation Account Allocation Committee for survival.”
He urged state governments to identify sectors with competitive advantage and harness them to drive growth. “Once that is mapped out, they need to communicate and amplify these opportunities to both the local private sector and foreign investors,” he said.
Abimbola stressed the importance of investor-friendly reforms: “States should adopt supportive policies and avoid stifling regulations, which often deter investment.”
He warned of political distractions undermining governance, stating, “The thing is, state governors know what to do. They know what to do. But what’s lacking is the political will to pursue them.” He added that the situation has worsened in 2025 as political actors focus more on the 2027 elections than on governance.
Macroeconomic analyst Dayo Adenubi also emphasized the need for revenue diversification. He advised that states should raise consumption levels to boost Value Added Tax collections.
He also called for improved tax enforcement: “Especially by enforcing taxes such as property taxes and transport-related levies,” while stressing that governments must fulfill their social contract to earn public trust.
Adenubi added that better economic policy at the subnational level could catalyze growth. Enhancing the ease of doing business would attract corporate investment and job creation, which in turn would increase Pay-As-You-Earn tax collections and reduce the need for debt.