Nigeria’s state governments failed to settle a combined N1.06tn in debts owed to contractors and retirees in 2024, even as they enjoyed the largest revenue allocations ever disbursed by the Federation Account Allocation Committee (FAAC), a new BudgIT report has revealed.
The civic-tech organisation, in its State of States 2025 assessment, said states accumulated N434.87bn in outstanding contractor payments and N626.81bn in pension and gratuity arrears — a sign, it noted, of poor fiscal discipline in the face of historic revenue inflows.
According to the report, 30 states admitted to owing contractors or retirees. Twenty-six have unresolved contractor debts, while 27 are behind on pension payments. Only Borno, Kano and Nasarawa reported zero outstanding obligations, placing them among the most fiscally responsible states in 2024.
Kaduna, Ogun, Benue Lead in Debt Accumulation
Kaduna State topped the list with a combined N139.36bn in arrears — the highest in the country — including N83.29bn in unpaid pension obligations, the worst pension backlog of any state. Ogun ranked second with N107.18bn, driven largely by its N81.54bn pension debt.
Benue placed third with N99.68bn, followed closely by Edo, Enugu, Imo, Akwa Ibom, Delta, Oyo and Plateau, forming a top-10 cluster that collectively accounts for nearly half of all outstanding obligations.
In contrast, Lagos recorded one of the lowest arrears nationwide, with just N48.74m owed to contractors and no pension backlog. Other states with minimal liabilities include Ebonyi, Jigawa, Katsina, Yobe and Ondo.
Rivers Omitted Over Legal, Political Turmoil
Rivers State was excluded from BudgIT’s 2025 review after it failed to produce audited financial statements for 2024. The organisation explained that the Federal High Court’s nullification of the state’s 2024 budget rendered any financial reporting invalid.
For the 35 states evaluated, total obligations — including unpaid salaries, judgment debts and other commitments — climbed to N1.24tn.
Rising Revenues, Rising Arrears
The findings highlight a troubling paradox: states received unprecedented revenues in 2024 but still allowed arrears to grow sharply.
FAAC disbursements more than doubled to N11.38tn, up from N5.4tn in 2023, driven by fuel subsidy removal and exchange-rate reforms. Yet, according to BudgIT, many states continued to channel resources into recurrent spending, political appointments and overheads instead of settling inherited debts.
Four states — Kaduna, Benue, Adamawa and Taraba — now carry arrears that exceed their entire Internally Generated Revenue (IGR) for the year. Benue, for instance, generated N20.92bn but owes N99.68bn — nearly five times its IGR — meaning it would need about five years of full revenue to clear its backlog.
Retirees Bear the Brunt as Pension Arrears Deepen
The pension crisis remains particularly acute. PenCom recently disclosed that only 17 states are currently operating the Contributory Pension Scheme. Twelve have yet to begin implementation, while seven are still transitioning.
The Nigerian Union of Pensioners criticised the growing backlog, warning that many retirees are slipping deeper into hardship as states delay entitlements.
Contractors Ramp Up Pressure Nationwide
The report comes amidst rising tension from contractors nationwide. Earlier this month, federal contractors stormed the National Assembly over alleged unpaid claims totalling N3tn. The Indigenous Contractors Association has threatened continued protests until the debts are cleared.
BudgIT warned that unless states adopt firmer fiscal controls and prioritise the settlement of legacy debts, the mounting arrears could cripple capital projects, strain government finances and worsen the suffering of vulnerable retirees.
Leave a Reply