PART 1 — ARTICLE Nigerian states have resumed borrowing despite a 161 percent increase in Federation Account Allocation Committee (FAAC) allocations over three years. FAAC disbursements rose from N2.8 trillion in 2022 to over N7.3 trillion in 2025, yet state domestic debt has climbed back to N4 trillion after briefly falling to N3.8 trillion in early 2025 from N5.8 trillion in 2023. This renewed borrowing coincides with growing reliance on federal funds, as FAAC accounts for 70 to 95 percent of revenue in most states. Only Lagos has significantly reduced its dependence, with Internally Generated Revenue (IGR) forming the core of its finances.
Experts warn that rising allocations are fostering fiscal complacency rather than driving productivity. Instead of investing in agriculture, education, healthcare, and infrastructure that yield long-term returns, many states are using windfalls to sustain bloated administrative costs and politically motivated spending. There is concern that increased revenue is not being channelled into economic expansion or service delivery. The result is a cycle where higher allocations do not reduce borrowing but instead enable continued dependence.
The article notes that in a functional system, increased revenue would trigger greater investment in sectors that improve living standards and broaden the tax base. However, most states are not building economies capable of generating sustainable income. The focus remains on federal allocations rather than developing local economic potential through innovation, enterprise, and efficient governance. Without reform, the pattern of rising revenue alongside rising debt will persist, delivering little benefit to citizens.
Most state governments are borrowing more even as their federal allocations surge, exposing a fiscal logic that defies basic economic sense. If FAAC funds are increasing so dramatically, why are states not using them to cut debt or boost IGR instead of returning to the markets? The fact that only Lagos has shifted toward revenue self-reliance suggests others are prioritising short-term spending over structural change. This pattern leaves citizens paying the price through deteriorating services, regardless of how much money flows into state coffers.
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