Professional Assessment of Public Debt Sustainability in Selected Nigerian States

Subnational debt accumulation has intensified in several Nigerian states, raising sustainability concerns, and professionally assessing debt sustainability in a representative sample of states provides evidence for subnational debt management reform. This study professionally assessed public debt sustainability in six Nigerian states representing the geopolitical zones: Lagos (SW), Enugu (SE), Rivers (SS), Plateau (NC), Kano (NW), and Adamawa (NE). A Debt Sustainability Analysis framework adapted from the IMF-World Bank methodology was applied to each state's 2016 to 2022 public finance data. Debt-to-IGR ratios, debt service-to-revenue ratios, and fiscal primary balance requirements were computed. Results confirmed that four of six states had debt service ratios above 30 percent of total revenue, indicating elevated sustainability risk. Lagos showed the most sustainable debt profile relative to IGR. Adamawa and Plateau showed the most stressed positions, with debt service consuming 47 and 43 percent of total revenue respectively. Domestic debt restructuring through the DRSS had improved short-term liquidity for three states but deferred rather than resolved structural imbalances. The study recommends a mandatory subnational DSA reporting requirement in the Fiscal Responsibility Act, debt ceiling mechanisms linked to IGR performance, and technical assistance for states with stressed debt positions through the Debt Management Office.

Keywords: public debt sustainability, subnational debt, Nigerian states, debt service ratio, fiscal governance