State governments throughout Nigeria spent a mixed N1.99 trillion on debt servicing in 2025, whereas excellent pension and gratuity obligations, in addition to unpaid contractor payments, continued to position strain on their funds, elevating issues about their capability to satisfy different expenditure commitments.
According to BudgIT’s 2026 State of States report with the title, “From Allocation to Impact: Rethinking State Spending Priorities”, 35 states coated by the evaluation recorded whole debt servicing funds of N1.99 trillion in 2025, in contrast with N2.12 trillion in 2024.
The quantity represents a decline of about N125.08 billion, or 5.91 per cent, yr on yr.
However, the mixture expenditure masks vital will increase in debt servicing by a number of states, with some recording greater than a 200 per cent rise throughout the interval.
Lagos accounted for the most important share of the 2025 debt servicing funds, spending N479.13 billion, representing about 24.1 per cent of the mixture for the 35 states. The determine was a rise from N416.12 billion in 2024.
Oyo State adopted with N182.96 billion, in contrast with N45.02 billion within the previous yr, representing a 306.38 per cent enhance. Plateau spent N107.65 billion, up from N52.44 billion, whereas Benue recorded N104.57 billion and Osun N100.17 billion.
Other states with substantial debt servicing funds included Ogun, which spent N87.41 billion; Kaduna, N73.40 billion; Cross River, N69.77 billion; Bauchi, N59.59 billion; and Bayelsa, N59.50 billion.
The report additionally confirmed that debt servicing elevated by 263.35 per cent in Osun, 260.57 per cent in Ebonyi, 240.03 per cent in Anambra and 216.50 per cent in Taraba. Ebonyi’s debt servicing rose from N11.79 billion in 2024 to N42.51 billion in 2025.
Beyond debt servicing, the report highlighted the burden of unpaid obligations to contractors, pensioners and retirees, which symbolize extra claims on state assets outdoors typical debt figures.
It famous that such liabilities “represent claims on future public resources and can impose costs on retirees, workers and businesses even before they are formally settled.”
The report’s 2025 payables and liabilities desk confirmed that Delta had the best reported contractor obligations at N121.69 billion, adopted by Ogun with N97.91 billion, Kaduna with N72.95 billion and Enugu with N64.97 billion.
Other vital contractor arrears included N43.94 billion in Lagos, N43.52 billion in Imo, N43.32 billion in Ebonyi and N20.23 billion in Benue.
The pension and gratuity figures additionally revealed substantial excellent obligations. Kaduna recorded the best reported quantity at N100.29 billion, adopted by Benue with N71.02 billion, Ogun with N69.95 billion and Edo with N51.37 billion.
Bauchi reported pension and gratuity arrears of N41.41 billion, whereas Niger recorded N41.75 billion. Enugu had N37.79 billion, Abia N37.51 billion and Plateau N35.19 billion.
The report additional confirmed that Kwara had N23.87 billion in pension and gratuity arrears, whereas Adamawa recorded N24.05 billion. Other states embrace Bayelsa with N12.15 billion, Ondo with N13.46 billion, Kogi with N9.19 billion and Ekiti with N8.07 billion.
The strain from these obligations is mirrored within the share of income absorbed by debt servicing in some states.
Plateau’s debt servicing amounted to 35.28 per cent of its whole income, whereas Ogun spent 17.11 per cent and Kaduna 16.03 per cent. Ebonyi’s debt service funds represented 15.99 per cent of its income.
Although the mixed debt servicing expenditure of the 35 states declined in 2025, the will increase recorded by a number of states, alongside substantial unpaid liabilities, spotlight the necessity to assess state fiscal sustainability past reported debt shares alone.
The report burdened the necessity for sustainable debt technique to increase past statutory borrowing limits, saying “states want credible medium-term debt methods, clear reporting of ensures and arrears, conservative exchange-rate threat administration and a stronger connection between borrowing and productive capital formation.
“The key consideration should be whether debt-financed spending expands the future capacity of the state to provide services and generate revenue. Without that discipline, higher revenue inflows can coexist with growing fiscal vulnerabilities,” it mentioned.
BudgIT, subsequently, urged state governments and legislatures to deal with debt transparency, venture appraisal, arrears clearance and oversight of loan-funded programmes as central obligations of public monetary administration, quite than as peripheral compliance workouts.
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