Sub-national debts owed by Nigerian states and local governments stood at ₦4.09 trillion as of December 2024, according to fresh data from the Central Bank of Nigeria’s quarterly statistical bulletin.
This marks a modest decrease of ₦112 billion or 2.7 percent compared to the ₦4.20 trillion recorded at the end of 2023, signalling a slight improvement in the overall debt profile.
A breakdown of the December 2024 figures shows that commercial and merchant banks accounted for ₦2.41 trillion, or 58.9 per cent of the total.
This reflects a ₦233 billion reduction from the ₦2.64 trillion owed to them in December 2023.
In contrast, state and local government borrowing from the Central Bank increased from ₦1.56 trillion in 2023 to ₦1.68 trillion in 2024, representing 41 per cent of the debt stock.
The rise underscores growing sub-national dependence on direct CBN financing.
For the first time, the bulletin captured a ₦3.77 billion exposure from non-interest banks to sub-national borrowers, while both primary mortgage and microfinance banks reported no outstanding debts.
Monthly analysis of 2024 shows fluctuating borrowing patterns. In January, total sub-national debt reached ₦4.29 trillion, a 20.01 per cent year-on-year increase from ₦3.57 trillion in January 2023.
Figures dipped to ₦4.10 trillion in February and ₦4.09 trillion in March, before falling sharply to ₦3.52 trillion in April, a 14.07 per cent month-on-month drop and the only year-on-year contraction at 5.68 per cent.
In January, the CBN held ₦1.56 trillion of these claims (36.38 per cent), while commercial and merchant banks held ₦2.73 trillion (63.62 per cent).
However, by April, the CBN’s share rose to 45.17 per cent, and commercial banks’ exposure dropped to 54.71 per cent, reflecting a shift in lending trends amid tightening conditions.
Following the April low, claims rose again, up 14.74 per cent to ₦4.04 trillion in May—and peaked at ₦4.29 trillion in June. From July through December, total claims remained relatively stable, staying above ₦4 trillion.
Year-on-year comparisons revealed significant increases across most months. February and March saw rises of 12.96 per cent and 11 per cent, respectively, while June recorded the highest annual surge of ₦1.01 trillion—30.65 per cent more than in June 2023.
By December, total sub-national debt had eased to ₦4.09 trillion from ₦4.20 trillion a year earlier. Non-interest bank claims remained minimal—at ₦4.03 million until August and slightly lower at ₦3.77 million by December.
The data suggests growing reliance on the CBN, particularly during periods when commercial banks reduced their exposure, dropping from ₦2.73 trillion in January to ₦2.41 trillion in December.
Analysts say this retreat could be attributed to tighter regulations or greater risk sensitivity in the banking sector.
This slight easing in debt occurred amid high inflation and aggressive monetary tightening by the Central Bank.
Proshare Nigeria’s Director and Chief Economist, Teslim Shitta-Bey, warned that rising sub-national debt could threaten long-term fiscal stability.
He criticised the failure of both federal and state governments to manage their balance sheets effectively.
“Borrowing may appear convenient, but it’s not necessarily the right approach,” Shitta-Bey cautioned.
He advocated for longer-term financial instruments that resemble equity and called for a comprehensive national asset register to enable states to raise capital through asset-backed financing.
He cited the underuse of dormant assets like the National Stadium.
He also lamented the poor utilisation of state revenue bonds, urging a shift away from general obligation bonds.
Similarly, Lagos-based economist Adewale Abimbola attributed the financial fragility of many Nigerian states to their economic non-viability and overreliance on allocations from the Federation Account.
“Most states must begin to identify their competitive advantages and communicate them to attract local and foreign investment,” he said.
He also stressed the importance of reforming regulatory frameworks to improve ease of doing business.
According to Abimbola, the issue is not a lack of knowledge but a lack of political will. “Governors know what to do,” he stated bluntly, warning that governance is already being overshadowed by early political manoeuvring ahead of the 2027 elections.
Macroeconomic analyst Dayo Adenubi echoed these concerns and urged states to focus on increasing internally generated revenue (IGR).
He recommended boosting consumption to grow VAT collections, enforcing existing levies like property and transport taxes, and ensuring public services meet expectations to maintain taxpayer trust.
He emphasised that better sub-national policies and business environments could encourage job creation and higher PAYE tax receipts, reducing the need for borrowing.
