For close to two weeks now, we have been presented with the financial status of Nigeria’s 36 states and the Federal Capital Territory, thanks to insights from two separate reports.

The first report, published by the civic-tech organization BudgIT and titled "the 2024 State of States" , revealed that 32 out of 36 states relied on the monthly allocations from the Federation Account Allocation Committee (FAAC) for at least 55% of their revenue in 2023. The report highlighted a critical issue which is the fact that over-dependence of state governments on federal transfers, makes them vulnerable to external shocks, particularly those tied to oil revenue fluctuations. It further noted that 14 states relied on FAAC for over 70% of their total revenue, and that transfers made up at least 62% of recurrent revenue for 34 states, with Lagos and Ogun being the only exceptions. 

The second report, released by the Debt Management Office (DMO), revealed the debt situation of the states, showing that total debt by the subnationals rose to N11.47 trillion as of June 2024—an increase of 14.57% from December 2023’s figure of N10.01 trillion. This rise was largely driven by foreign debt, which increased from $4.61 billion to $4.89 billion. Due to the naira’s devaluation, the naira-equivalent of this foreign debt surged by 73.46%. Domestic debt, meanwhile, saw a reduction from N5.86 trillion to N4.27 trillion, although it briefly increased by 4.91% between March and June 2024. The DMO report makes it clear that even with higher FAAC allocations, the states’ debt continues to grow, raising questions about their debt sustainability and financial management strategies.

No doubt, these two reports have provided crucial insights into the fiscal health and sustainability challenges facing Nigeria’s states. The verdict? Nigerian states are struggling with fiscal imbalances .

Here, we discuss the financial state of states and see how they can develop and implement strategies for fiscal survival.