As the year 2024 concludes, three states—Lagos, Kaduna, and Rivers—dominate Nigeria’s debt landscape, raising critical questions about fiscal sustainability and economic resilience. Together, these states exemplify the challenges of balancing development aspirations with mounting financial obligations in a fragile economy.
Lagos State: The Undisputed Debt Leader
Lagos State, Nigeria's commercial nerve center, holds the unenviable position of being the most indebted state in the country. With a domestic debt of ₦929.41 billion and an external debt of $1.201 billion (approximately ₦1.77 trillion), Lagos’s total debt profile stands at a staggering ₦2.70 trillion.
The state’s borrowing is largely driven by its ambitious urban development projects, including the construction of world-class infrastructure, expansion of transportation networks, and revitalization of its housing and industrial sectors. Despite its robust revenue base, Lagos’s reliance on loans has prompted debates about the sustainability of its development model.
Critics argue that the state’s debt servicing obligations could undermine its ability to fund critical sectors such as health and education. However, government officials maintain that Lagos's high Internally Generated Revenue (IGR), which exceeds that of many African countries, positions it to manage its debt effectively.
Kaduna State: Development Amid Financial Strain
Kaduna State ranks second with an external debt of $640.99 million, equivalent to approximately ₦942.64 billion. While domestic debt data remains unclear, the state’s borrowing highlights its commitment to infrastructure development, particularly in sectors like agriculture, education, and healthcare.
Governor Uba Sani’s administration has defended the state’s financial strategy, emphasizing the importance of long-term investments in transforming Kaduna into a regional economic powerhouse. Nevertheless, concerns about transparency and debt repayment persist, particularly as federal allocations to the state continue to dwindle.
Rivers State: Resource-Rich Yet Debt-Laden
Despite being one of Nigeria’s richest states in terms of natural resources, Rivers State finds itself grappling with significant debt. With an external debt of $203.81 million (₦299.65 billion), the state underscores the paradox of wealth amid financial strain.
Rivers has invested heavily in infrastructure, particularly roads and urban development, to boost its economic profile. However, observers argue that the state’s heavy reliance on oil revenue, coupled with fluctuating global oil prices, leaves it vulnerable to fiscal shocks. Calls for diversification and improved revenue management have intensified as the debt burden grows.
A National Dilemma
The debt obligations of these three states reflect broader fiscal challenges facing Nigeria. With declining oil revenues, rising inflation, and a fragile global economy, state governments are increasingly turning to domestic and international lenders to fund their projects.
Economists warn that this trend could lead to a debt trap, where states struggle to meet their repayment obligations, crowding out funding for essential services. Moreover, the depreciation of the naira has further increased the cost of servicing external debts, adding to the financial woes of these states.
The Way Forward
To address the rising debt burden, experts advocate for a multi-pronged approach. This includes diversifying revenue streams, enhancing fiscal discipline, and prioritizing investments that yield long-term economic benefits. Additionally, state governments must improve transparency and accountability in their borrowing practices to regain public trust.
As Nigeria’s economic challenges persist, the experiences of Lagos, Kaduna, and Rivers serve as a cautionary tale for other states. Balancing development goals with fiscal sustainability remains a daunting task, but one that is critical for the nation’s economic future.
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