Despite receiving unprecedented federal allocations in 2024, Nigerian states accumulated a combined ₦1.06tn in unpaid contractor, pension, and gratuity arrears, according to BudgIT’s 2025 State of States report. The findings paint a troubling picture of persistent fiscal stress at the subnational level, even in a year when revenue inflows more than doubled nationwide. The report shows that contractor arrears reached ₦434.87bn, while pension and gratuity backlogs hit ₦626.81bn, raising concerns about delayed projects and the welfare of retirees.
A total of 30 states reported outstanding obligations, with 26 owing contractors and 27 owing pensioners. Only three states—Borno, Kano, and Nasarawa—reported no liabilities in both categories, making them the most fiscally responsible states in 2024. At the other end of the spectrum, Kaduna State topped the debt list with ₦139.36bn in arrears, including the country’s highest pension backlog. Ogun, Benue, Edo, and Enugu followed closely, each with tens of billions in unresolved obligations.
The report highlighted that 10 states alone account for nearly half of the country’s total arrears burden. Lagos emerged as one of the least indebted, recording just ₦48.74m in contractor arrears and no pension backlog. States such as Ebonyi, Jigawa, Katsina, and Yobe also maintained relatively small liabilities compared to their peers. However, states like Kaduna, Benue, and Taraba carried debts significantly higher than their Internally Generated Revenue, raising fresh concerns about fiscal sustainability.
Despite the heavy backlog, states enjoyed record revenue in 2024, with FAAC allocations surging to ₦11.38tn, driven by subsidy removal and exchange-rate reforms. BudgIT noted that arrears persisted mainly because many states continued to channel spending toward recurrent costs—such as salaries, overheads, and political expenses —rather than clearing longstanding debts. The organisation warned that these debts, if left unaddressed, could slow down capital projects and erode public trust, especially among vulnerable retirees waiting for their entitlements.
Pension experts and labour groups have also expressed concern over the growing pension crisis. Only 17 states currently implement the Contributory Pension Scheme, while 12 have not begun at all. The Nigerian Union of Pensioners criticised state governments for “foot-dragging” on pension responsibilities and urged immediate action. Meanwhile, nationwide frustration over unpaid public obligations intensified recently when local contractors protested at the National Assembly over an alleged ₦3tn owed by the Federal Government, signalling a broader national challenge around public debt settlement.
source: punch