Abuja, November 24, 2025 – Nigeria’s subnational governments have amassed a staggering ₦1.06 trillion in domestic debt as of the second quarter of 2025, even as they received unprecedented allocations from the Federation Account Allocation Committee (FAAC), official data from the Debt Management Office (DMO) reveals.
The figure, representing the cumulative domestic borrowings of the 36 states and the Federal Capital Territory, marks a sharp escalation from previous periods, driven by surging infrastructure demands, fiscal shortfalls, and reliance on high-interest loans amid naira volatility. Despite FAAC disbursements hitting record highs—totaling over ₦5.6 trillion in the first half of 2025 alone, fueled by improved oil revenues and non-oil growth—states have leaned heavily on domestic securities like bonds and promissory notes to bridge funding gaps.
In the North-East geopolitical zone, for instance, the six states collectively carry approximately ₦450 billion in domestic debt, with Bauchi leading at ₦143.6 billion, followed by Taraba and Gombe, which together account for over two-thirds of the region’s burden.5e752e Nationally, subnational debt constitutes about 7.4% of Nigeria’s total public debt stock of ₦152.40 trillion as of June 30, 2025, up from ₦149.39 trillion in the first quarter.9971c910e6e1 This accumulation persists despite federal transfers exceeding projections, highlighting ongoing challenges in internal revenue generation and expenditure controls at the state level.
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In parallel developments, a comprehensive audit by the Office of the Auditor-General of the Federation has uncovered ₦61 billion in payment breaches at the Nigerian National Petroleum Company Limited (NNPC Ltd.), pointing to systemic lapses in financial oversight and regulatory compliance.
The 808-page report, covering fiscal years 2020-2021 and submitted to the National Assembly in September 2025, details irregular transactions totaling over $51 million (equivalent to approximately ₦61 billion at prevailing exchange rates), including payments to contractors without supporting documentation, failure to enforce statutory deductions, and unauthorized approvals. Key infractions include the non-deduction of 1% stamp duty on disbursements worth ₦24.7 billion and $52.98 million, resulting in foregone revenues of ₦247 million and $529,863; overpayments under the Direct Sales Direct Payment scheme totaling $22.84 million; and undocumented expenditures of $2.01 million and ₦478.5 million on depot optimization projects.
Further, the audit flags a ₦3.4 billion approval by NNPC’s Chief Financial Officer for inter-company transfers without Group Managing Director authorization, in violation of 2009 Financial Regulations, as well as delays in project executions leading to potential fund diversions.Auditors attribute these issues to “weak internal controls,” urging immediate recovery of funds and stricter adherence to procurement protocols.
The revelations come amid broader scrutiny of NNPC’s finances, including an ongoing Senate probe into ₦210 trillion in unaccounted funds from 2017-2023 and EFCC investigations into alleged $2.7 billion refinery fraud involving senior officials.NNPC management has defended some transactions as legacy issues from restructured subsidiaries but has not fully addressed recovery timelines.
These disclosures underscore deepening fiscal pressures across Nigeria’s public sector, with debt servicing—now projected at ₦16.3 trillion in the 2025 budget—threatening to crowd out investments in critical areas like infrastructure and social services.2f9fbc Stakeholders are calling for enhanced transparency and reforms to curb leakages and promote sustainable borrowing practice.
Clarion Newschannel will continue monitoring these developments as the National Assembly reviews the audit findings and state debt profiles.
States Rack Up ₦1.06 Trillion Debt Amid Record Federal Allocations; NNPC Audit Exposes ₦61 Billion in Payment Violations
