Increased FAAC Allocations in 2025 Reduce States’ Dependence on Borrowing – Springnewsng Report
Story for Higher Google SEO Ranking (By Springnewsng, July 9, 2025):
Abuja, Nigeria – Nigeria’s state governments have significantly reduced their borrowing in the first half of 2025, thanks to a sharp rise in monthly disbursements from the Federation Accounts Allocation Committee (FAAC), according to a new report by Springnewsng.
Data gathered from the Debt Management Office (DMO) and fiscal monitoring institutions indicate that states are increasingly relying on the FAAC windfall—boosted by improved oil revenue, exchange rate gains, and enhanced tax collection—to finance capital and recurrent expenditures.
In the first six months of 2025, FAAC disbursed an average of ₦1.3 trillion monthly to the three tiers of government, a notable jump from the ₦990 billion monthly average in 2024. This increase, driven largely by higher crude oil prices and naira devaluation, has provided states with more liquidity and reduced their appetite for fresh loans.
Several states, including Lagos, Rivers, Kaduna, and Delta, have reportedly suspended or scaled back planned bond issuances and external borrowing, citing improved cash flow positions.
Analysts say the drop in sub-national borrowing could help ease Nigeria’s overall debt burden, which stood at ₦97.3 trillion at the end of Q1 2025, according to DMO figures. They warn, however, that the relief may be temporary unless structural reforms are implemented to stabilize revenue sources and improve public financial management.
“While the increased FAAC inflow is providing short-term relief, states must use this opportunity to invest in revenue-generating infrastructure and reduce over-dependence on federal allocations,” said Dr. Kemi Adewale, a public finance expert at the University of Ibadan.
Despite the slowdown in borrowing, concerns remain about the efficient utilization of the increased funds. Transparency advocates are calling for improved monitoring of state-level spending to ensure the windfall translates into tangible development outcomes.
As the 2027 elections approach, fiscal discipline and sustainable financing strategies are expected to become key issues for state governments and political aspirants alike.
