Lagos and Edo have emerged as Nigeria’s most indebted states per capita, with each citizen owing more than N100,000 in state debt, according to BudgIT’s 2025 State of States Report released on Tuesday.
It was revealed that Enugu State is Nigeria’s most fiscally viable subnational government.
According to BudgIT’s 2025 State of States ranking, Enugu State ranks as the state most likely to fund its operating expenses exclusively from internally generated revenue (IGR).
According to the report, Enugu, Lagos, Abia, Anambra, and Kwara are the five states most capable of surviving independently of allocations from the Federation Account Allocation Committee (FAAC).
Conversely, Yobe, Benue, Jigawa, Kogi, and Imo were ranked as the least viable states.
Anambra State emerged as Nigeria’s best-performing state, overtaking Lagos to claim the top spot for the first time in the fiscal sustainability rankings.
Rivers State, a consistent top-five performer, was dropped from this year’s edition following a state of emergency that rendered its financial data inaccessible.
The 2025 edition marks 10 years of BudgIT’s subnational fiscal assessment, with the theme, “A Decade of Subnational Fiscal Analysis: Growth, Decline and Middling Performance.”
It ranked 35 Nigerian states based on revenue generation, expenditure efficiency, debt sustainability, and investments in key sectors such as education and health.
According to the report, the average debt per capita across 35 states rose slightly from N40,469 in 2023 to N41,766 in 2024, despite a slowdown in total debt accumulation.
Twelve states, including Lagos, Edo, Kaduna, Cross River, Ogun, Ekiti, Bayelsa, Bauchi, Abia, Enugu, Ebonyi, and Adamawa, exceeded the national average.
BudgIT said Nigeria’s total subnational debt increased modestly by 6.8 per cent, from N9.89 trillion in 2023 to N10.57 trillion in 2024, compared to a sharp 36.4 per cent rise recorded the previous year.
The report noted that five states, Lagos, Kaduna, Edo, Ogun, and Bauchi, accounted for more than half, about 50.3 per cent, of the total debt stock, amounting to about N5.32 trillion.
While Lagos retained its position as the most indebted state in terms of domestic and foreign obligations, Edo and Kaduna also featured prominently among the top debtors.
Lagos’ foreign debt stood at $1.17 billion, representing over 25 per cent of total subnational external debt, followed by Kaduna with $625.1 million and Edo with $383.05 million.
Despite the high debt burden, BudgIT noted encouraging progress in debt management. Thirty-one states reduced their domestic debt stock by at least N10 billion during the 2024 fiscal year, an improvement compared to 2023, when only 15 states achieved reductions. Lagos, Cross River, and Delta led the way, each cutting over N100 billion from their domestic debt portfolios, leading to a cumulative reduction exceeding N2 trillion.
The report also observed a downward trend in external borrowings. Total foreign debt fell by over $200 million between 2023 and 2024, with Lagos, Enugu, and Gombe recording the highest reductions.
However, 24 states still had foreign debt constituting more than half of their total debt, with Kaduna, Jigawa, Ondo, Ebonyi, Katsina, Anambra, Edo, and Kebbi all exceeding the 80 per cent mark.
BudgIT further highlighted that additional liabilities, including contractor arrears, pension and gratuity obligations, and judgement debts, rose slightly to N1.24 trillion in 2024, up from N1.19 trillion the previous year.
Contractor arrears alone accounted for N434.87 billion, while pension and gratuity obligations reached N626.81 billion.
Meanwhile, the report listed Anambra, Lagos, Kwara, Abia, and Edo as the top five states in 2025. Lagos was in the second position while Kwara climbed from fourth to third.
Abia made its debut in the top five, and Edo broke into the elite bracket after several years of ranking within the top 10.
The report noted that Anambra’s rise to the number one position reflects improvements in internally generated revenue (IGR) growth, capital investment, and expenditure efficiency.
BudgIT’s analysis further revealed that despite gains in transparency and subnational reforms, most states still face structural weaknesses.
Only five states, Abia, Anambra, Kwara, Ogun, and Edo, could generate at least 50 per cent of their operating expenses internally in 2025, down from six in the previous year.
The report attributed the decline to slow IGR growth and increased dependence on federal allocations.
“While Lagos remains the only state that consistently covers its operating expenses through IGR, Enugu emerged as a new leader with an impressive 146.68 per cent IGR-to-operating expense ratio,” the report stated.
Abia also stood out for prioritising capital development, dedicating 77.05 per cent of its total spending to capital projects, the highest in the federation.
Other strong performers in capital investment include Anambra, Enugu, Ebonyi, and Taraba, all of which allocated more than 70 per cent of their total expenditure to infrastructure and development.
In contrast, the report observed that Bauchi, Ekiti, Delta, Benue, Oyo, and Ogun spent over 60 per cent of their budgets on personnel and overhead costs, reflecting the continuing imbalance between consumption and development expenditure in several states.
Despite record FAAC inflows, fiscal dependence on the centre remains significant. BudgIT disclosed that 28 states relied on federal transfers for more than half of their total revenue, while 21 states depended on FAAC for at least 70 per cent.
Gross FAAC transfers reached N11.38 trillion in 2024, more than double the N5.4 trillion recorded in 2023, yet the proportion of IGR in total state revenue fell to 20.27 per cent from 25.27 per cent a year earlier.
Commenting on the findings, BudgIT’s Group Head of Research, Vahyala Kwaga, described the 2025 edition as both a milestone and a wake-up call for subnational governments.
“Over the past decade, the State of States report has evolved into Nigeria’s most authoritative subnational fiscal analysis.
“This 10th edition not only reflects the story of growth and imbalance but also underscores the urgent need for reform.
“Fiscal sustainability requires that states look inward, improve revenue systems, cut waste, and prioritise infrastructure and human development investments that deliver long-term value,” he said.
