The Federal Capital Territory’s domestic debt has surged dramatically within a year, climbing to nearly N390 billion and placing the territory among the sub national entities driving Nigeria’s rising debt burden.

Data from the Debt Management Office showed that the FCT’s domestic debt increased from N61.12 billion in March 2025 to N389.87 billion in March 2026.

The increase represents a 538 per cent jump in just 12 months.

The sharp rise came as domestic debt across Nigeria’s 36 states and the FCT increased by more than N654 billion during the period.

Combined domestic debt rose from N3.86 trillion in March 2025 to N4.52 trillion in March 2026, despite 26 states recording reductions in their debt stocks.

Kaduna recorded the second-largest percentage increase during the period, with its domestic debt rising from N25 billion to N87.86 billion, representing a 251.3 per cent increase.

Yobe also recorded a significant rise, with its domestic debt moving from N39.62 billion to N98.59 billion.

In terms of total debt, however, Lagos remained the most indebted sub national government, with its domestic debt rising from N874.04 billion to N1.21 trillion.

Other states that recorded increases included Bauchi, Borno, Cross River, Delta, Jigawa, Nasarawa and Ogun.

The figures have renewed debate over why subnational governments are borrowing more despite increased allocations from the Federation Account.

Economic analysts say the sustainability of the borrowing will depend largely on how the funds are deployed and whether the investments generate enough economic activity and revenue to support repayment.

Mayowa Amoo, Chief Executive Officer of QLP Capital, stressed that borrowing itself was not necessarily the problem, but what governments do with the funds.

“The economy expands because there are also other things that go along with logistics. So, what you use the money for is more important than the fact that you’re just borrowing,” Amoo said.

He explained that borrowing for productive investments could strengthen government revenue and improve repayment capacity.

“If you borrow and use the money to generate more wealth and goods, that means you’ll be able to generate more taxes as a government, which is the major source of debt repayment,” he said.

Amoo, however, warned that aggressive borrowing without corresponding economic returns could undermine Nigeria’s improving credit position.

“Our credit rating is improving, and international lenders are happy to lend to us because we are doing the right things in terms of reform,” he said.

“But if we go too aggressive and find ourselves back in problems, our credit rating will be diminished, and we will be locked out of the capital markets.”

Economic expert and Executive Director of Frontline Investments, Uzor Joseph, also called for stronger revenue generation and greater discipline in the management of borrowed funds.

“This capacity is crucial for financing essential infrastructure, investing in human capital development, meeting the new minimum wage and its consequential adjustments, and repairing the fractured social contract,” Joseph said.

He also urged states to reduce their exposure to foreign loans because of exchange-rate risks and ensure that borrowed funds are directed towards projects capable of generating economic returns.

“To achieve debt sustainability, states must also curb their reliance on foreign loans, especially in light of exchange rate volatility, to minimize exposure to unfavorable rates. Additionally, states should establish robust frameworks for transparency, ensuring borrowed funds are allocated to high-impact projects with clear economic returns,” he said.

Abuja-based economist Ishaq Ibrahim linked the renewed borrowing appetite to rising infrastructure costs and the financial pressures associated with the new minimum wage.

He noted that increased federal allocations had not prevented several states from seeking additional financing, indicating that higher revenues are still struggling to keep pace with expanding expenditure demands.

“This revenue-debt paradox raises urgent questions about fiscal discipline, as surging inflows intended to provide a social safety net are increasingly swallowed by rising debt-servicing costs and a renewed appetite for commercial loans,” Ibrahim added.

With the FCT’s domestic debt now approaching N390 billion, the latest figures have intensified scrutiny of how governments at the sub national level are deploying borrowed funds and whether the fresh debt will produce lasting economic value or create heavier repayment pressures in the years ahead.