The Nigeria Extractive Industries Transparency Initiative (NEITI) has issued a policy-backed caution on the “silent fiscal emergency” facing many States in Nigeria.
The Report also called for the establishment of State Debt Management Offices (DMOs) in all 36 States to ensure effective debt management.
According to the Report released on Sunday, “Debt servicing obligations are constraining States’ capacity to fund essential services, local infrastructure, and poverty reduction initiatives”
The Report, in its key findings, noted that as a result of debt servicing deductions “between 10% and 30% of monthly FAAC allocations in many States are directly deducted at source for debt servicing, leaving less room for grassroots development investment.”
The Report listed high-debt States to include Kaduna which recorded the highest 2024 deduction ratio at 32.06%, followed by Ogun with 27%, Bauchi with 26%, and Cross River with 24%.
It recorded Borno, Jigawa, Benue, and Nasarawa as low-debt States with low debt burden commitments, providing practical models for maintaining a healthy debt-to-GDP profile.
Orji Ogbonnaya Orji, Executive Secretary, NEITI said, “Debt, when managed efficiently, can be a tool for financing development at the grassroots. But when servicing obligations consume up to a third of monthly revenues, it becomes a threat to the future of public service delivery and economic stability.”
The NEITI Report in their recommendations called for the
Establishment of State Debt Management Offices (DMOs) in all 36 States to ensure effective debt management.
It also called for Mandatory debt reporting, Real-time debt reporting and quarterly public disclosures to promote transparency.
The Report also called on States to link to federal bailouts to improvements in internally-generated Rmrevenue (IGR) and fiscal transparency; revise revenue allocation formula, address vertical and horizontal imbalances and Cap contractual deductions.
Orji noted that the implications of failing to do the above would lead to disparities in revenue sharing formula and high debt-servicing ratios in smaller-allocation States and as well hold hidden liabilities.
The brief, which serves as a warning bell and a reform blueprint, urges the State and Federal Authorities to act decisively with bold reforms before debt becomes a burden that will be shared with relevant stakeholders, including the Federal Government, National Assembly, and State Governments.
(Business Day)
