By Obinna Uballa
Nigeria’s subnational governments are facing deepening fiscal distress as 30 states piled up a combined N1.06 trillion in unpaid obligations to contractors and retirees in 2024, despite receiving the highest federal allocations in the country’s history. The troubling figures were contained in BudgIT’s newly released 2025 State of States report.
The civic organisation found that states owed N434.87 billion to contractors and a staggering N626.81 billion in pension and gratuity arrears, alongside additional liabilities in salaries, legal judgments and other claims. Only Borno, Kano and Nasarawa reported zero backlog in both categories, making them the only states without outstanding obligations in 2024.
Kaduna, Ogun, Benue Lead the Debt Pile
Kaduna State emerged as the biggest debtor, with a combined burden of N139.36bn – more than double its Internally Generated Revenue (IGR) for the year. The state carried Nigeria’s highest pension backlog at N83.29bn, along with N56.07bn owed to contractors.
Ogun followed with N107.18bn in arrears driven largely by pension debts of N81.54bn. Benue ranked third with N99.68bn, despite generating only N20.92bn internally, meaning it owed nearly five times its entire annual IGR.
Edo, Enugu, Imo, Akwa Ibom, Delta, Oyo and Plateau completed the top 10 most indebted states, collectively accounting for almost half of the N1.06tn arrears nationwide.
At the lower end, Lagos reported just N48.74m in contractor arrears and zero pension liabilities, placing it among the least indebted states, behind Kano and Nasarawa. Others with minimal arrears included Ebonyi, Borno, Jigawa, Katsina, Yobe and Ondo.
Rivers Excluded Over Political Turmoil
BudgIT disclosed that Rivers State was excluded from the analysis due to its failure to produce an audited financial statement for 2024. The Federal High Court had nullified its 2024 budget amid the controversial emergency rule imposed on the state.
For the 35 states reviewed, total liabilities exceeded N1.24tn when salaries, legal debts and other obligations were included.
The report highlights a stark contradiction, noting that even with record revenues, many states deepened their debt holes.
FAAC allocations surged to N11.38tn in 2024 – more than double the N5.4tn shared in 2023 – driven by subsidy removal and foreign exchange reforms. Yet many states prioritised recurrent spending, political appointments and rising personnel costs over clearing arrears.
Four states: Kaduna, Benue, Adamawa and Taraba, owed arrears far exceeding their entire IGR for 2024, raising alarms about long-term solvency.
Taraba, for instance, generated N16.06bn but owed N23.53bn, mostly in pension arrears. Adamawa’s N27.5bn pension debt outstripped its N20.3bn revenue base.
The pension burden remains a major driver of state indebtedness. According to the National Pension Commission, only 17 states have fully implemented the Contributory Pension Scheme introduced in 2004. Twelve have not started at all, while seven are still setting up pension bureaus.
PenCom warned that failure to adopt the scheme fuels unsustainable pension backlogs. The Nigerian Union of Pensioners echoed this, accusing states of “foot-dragging” and urging them to pay retirees’ entitlements.
The debt crisis is not limited to states. Earlier this month, contractors besieged the National Assembly to protest alleged unpaid federal debts totalling N3tn for completed projects. The Indigenous Contractors Association vowed to maintain pressure until they receive payment.
BudgIT warned that if subnational arrears continue to accumulate, states risk stalled capital projects, weakened investor confidence and deepening hardship for pensioners who depend on monthly benefits.
