Nigerian states are increasingly turning to borrowing to finance infrastructure and government programs, but gaps in publishing financial records may lead to higher costs. Lenders want to know a state's revenue, expenditure, and debt before giving money. Without this information, lenders may consider a state riskier and demand higher interest rates. This could leave states with less money for essential projects like roads, healthcare, and education.
According to BudgIT's 2026 Half-Year Budget Implementation Report, only 34 states published required budget implementation information in the second quarter of 2026. This is a slight decrease from 35 states in the same period of 2025. Rivers was listed as non-compliant, while Osun joined the list in the second quarter. Budget implementation reports show how much of an approved budget a government has spent and what it was spent on.
The transparency issue is not limited to budget reports. In September, BudgIT excluded Akwa Ibom and Rivers from an assessment of states' post-subsidy finances due to incomplete budget implementation records. Analysts say poor financial disclosure can directly affect the price states pay for money. When a government consistently publishes clear and timely accounts, lenders have more information to assess its ability to repay.
The problem of missing financial records can have significant implications for states. With states competing for funds in the same financial environment as the federal government, weak disclosure could make access to affordable credit more difficult. For instance, the Federal Government's 364-day Treasury Bill closed at a 17.70 percent stop rate in July, with an implied yield estimated at about 21.51 percent.
Improving financial transparency could become increasingly important for states seeking fresh loans. Publishing complete budgets and financial reports is not just a bureaucratic requirement; it can influence how much states pay to borrow and, ultimately, how much public money remains available for development. States are currently enjoying higher allocations from the federation account but are also returning to the debt market to raise additional funds.
BudgIT's second-quarter 2026 States Fiscal Transparency League assessed the 36 states based on the availability and completeness of key financial documents, functioning e-procurement portals, and fiscal data repositories. The assessment aims to promote transparency and accountability in state finances. By publishing financial records, states can demonstrate their commitment to transparency and potentially access more affordable credit.
The issue of missing financial records highlights the need for states to prioritize transparency and accountability in their financial dealings. By doing so, states can build trust with lenders and investors, potentially leading to lower borrowing costs and more favorable loan terms. This, in turn, can enable states to allocate more resources to essential public services and infrastructure projects.
Key points
- Nigerian states face higher borrowing costs due to incomplete financial records.
- Only 34 states published required budget implementation information in the second quarter of 2026.
- Improving financial transparency is crucial for states seeking fresh loans.
