States accumulate N1.06tn debt backlog despite record FAAC windfall – BudgIT report

Nigeria’s state governments accumulated a staggering N1.06tn in unpaid obligations to contractors and retirees in 2024, despite receiving the highest federal allocations in the country’s history, according to BudgIT’s latest State of States report.

The civic organisation revealed that contractor debts amounted to N434.87bn, while pension and gratuity arrears stood at N626.81bn, exposing severe fiscal mismanagement across subnational governments even amid unprecedented revenue inflows.

Thirty states reported owing contractors or retirees, with 26 carrying contractor arrears and 27 owing pension backlogs. Only Borno, Kano and Nasarawa recorded no outstanding liabilities, making them the most fiscally compliant states in 2024.

Kaduna, Ogun, Benue Top the List of Biggest Debtors

Kaduna State led the debt chart with N139.36bn in combined arrears – the highest in the country – including N83.29bn in pension liabilities, the largest pension backlog nationwide. Ogun followed with N107.18bn, driven by its massive N81.54bn pension arrears, while Benue ranked third with N99.68bn.

Edo, Enugu, Imo, Akwa Ibom, Delta, Oyo and Plateau rounded out the top 10, jointly accounting for nearly half of all state-level arrears.

At the opposite end, Lagos reported only N48.74m in contractor arrears and no pension debt. Ebonyi, Borno, Jigawa, Katsina, Yobe and Ondo also recorded minimal liabilities.

Rivers Excluded Due to Political Crisis

BudgIT excluded Rivers State from its 2025 review due to its failure to produce audited accounts for 2024. The Federal High Court’s nullification of the state’s 2024 budget rendered any financial reporting unconstitutional, the organisation noted.

For the 35 states assessed, combined obligations, including salaries, judgment debts and other liabilities, climbed to N1.24tn.

Record Revenues, Yet Rising Arrears

The contradiction at the heart of the report is stark: despite receiving unprecedented funds, several states slid deeper into debt.

FAAC disbursements surged to N11.38tn in 2024, up from N5.4tn in 2023, largely due to the removal of fuel subsidies and exchange-rate reforms. Yet BudgIT found that many states continued to prioritise recurrent spending, ballooning political appointments, and overheads over settling legacy debts.

Four states – Kaduna, Benue, Adamawa and Taraba – carried arrears far greater than their entire Internally Generated Revenue for the year, raising new concerns about long-term fiscal sustainability.

Benue, which generated N20.92bn internally, owed N99.68bn – almost five times its IGR -and would theoretically need five years of revenue to clear its backlog.

Pension Burden Grows as States Delay Reforms

The pension arrears crisis remains particularly severe. PenCom disclosed that only 17 states are currently implementing the Contributory Pension Scheme. Twelve have not begun, while seven are in transitional stages.

The Nigerian Union of Pensioners criticised state governments for delaying payments and urged immediate settlement of retirees’ entitlements.

Contractors Protest Nationwide Debt Accumulation

The debt crisis also mirrors a growing national trend. Earlier this month, contractors besieged the National Assembly over an alleged N3tn owed by the Federal Government for completed projects. The Indigenous Contractors Association vowed sustained protests until payments are made.