The subnational debt data for the five South-East states, Abia, Anambra, Ebonyi, Enugu, and Imo, between June and December 2025 reveals more than a set of fiscal adjustments. It reflects an evolving Public Financial Management landscape in which debt behaviour is increasingly shaped by macroeconomic constraints, institutional capacity, governance incentives, and differing fiscal cycles across states. While domestic debt declined across all states and external debt increased in four out of five, the deeper story is not simply one of borrowing shifts, but of systemic fiscal reconfiguration under pressure.
What emerges is not convergence toward a single fiscal model, but divergence across governance quality, fiscal strategy, and development orientation. The region is increasingly characterised by distinct fiscal cycles, where some states are consolidating, others are substituting risk, and others are expanding debt exposure.
Enugu is the most indebted, operating a dual-phase cycle of expansion and correction. Imo combines high debt with rising external exposure, making it the highest-risk fiscal profile. Ebonyi is currently the least indebted but is the fastest-rising external borrower, indicating emerging risk accumulation. Anambra is structurally improving its fiscal position through strong domestic consolidation and managed external borrowing. Abia remains stable but exhibits limited fiscal transformation and weak adjustment dynamics.
Together, these identities define a region navigating the intersection of fiscal constraint, governance capacity, and development ambition, with long-term outcomes contingent on the strength of institutional reform and Public Financial Management effectiveness.
*Macroeconomic and Public Financial Management Context*
The debt behaviour of South-East states must be situated within Nigeria’s broader macro-fiscal environment in 2025. Subnational governments are operating under elevated domestic interest rates, tightening liquidity, exchange rate volatility, and persistent inflationary pressures. At the same time, fiscal transfers remain uncertain and largely consumption-driven, while internally generated revenue remains structurally weak across most states.
From a Public Financial Management perspective, these conditions have exposed persistent weaknesses in budget credibility, cash management systems, and medium-term fiscal planning frameworks. Borrowing decisions are therefore increasingly influenced not only by development priorities but also by liquidity pressures, refinancing needs, and fiscal sustainability constraints.
Within this context, a more important analytical distinction emerges: states are operating within different fiscal cycles. Some are in consolidation phases, reducing liabilities and stabilising debt structures. Others are in expansionary borrowing cycles, increasing exposure in pursuit of development financing. A third group is engaged in substitution behaviour, replacing domestic debt with external debt due to cost differentials. These cycle differences are central to understanding the divergence observed in the data.
*Abia: Fiscal Stability Without Structural Transformation*
Abia presents a relatively stable but institutionally static fiscal profile. Domestic debt declined marginally from ₦48,498,429,597.22 in June 2025 to ₦48,410,403,758.61 in December 2025, a reduction of 0.18 percent. External debt increased slightly from $105,229,454.09 to $107,163,236.46, a rise of 1.84 percent.
These movements suggest fiscal continuity rather than structural reform. Abia appears to be operating within a low-adjustment equilibrium where debt management practices, budget structures, and medium-term planning systems remain largely unchanged. While this may provide short-term stability, it also indicates limited responsiveness to evolving macroeconomic pressures and missed opportunities for proactive debt optimisation.
From a governance and PFM perspective, Abia reflects administrative inertia rather than strategic transformation, with limited evidence of debt-driven fiscal restructuring.
*Anambra: Structural Adjustment Through Stronger PFM Discipline*
Anambra recorded the most significant domestic debt reduction in the region, falling from ₦26,669,599,158.96 to ₦11,550,207,903.17, a contraction of 56.68 percent. External debt increased moderately from $98,519,843.60 to $102,579,265.24, a rise of 4.12 percent.
This pattern reflects deliberate fiscal restructuring and stronger Public Financial Management discipline. The magnitude of domestic debt reduction suggests active liability management, improved cash control, or structured repayment strategies. Unlike states engaging in passive substitution, Anambra demonstrates clearer fiscal coordination between debt categories.
The controlled rise in external debt suggests a managed transition rather than uncontrolled exposure expansion. This positions Anambra within a reform-oriented fiscal cycle characterised by consolidation and structural rebalancing.
*Ebonyi: Emerging External Debt Risk and Expanding Fiscal Exposure*
Ebonyi’s domestic debt declined from ₦14,635,065,633.40 to ₦13,478,822,861.56, a reduction of 7.90 percent. External debt rose sharply from $95,554,378.26 to $108,018,267.02, a 13.04 percent increase, the highest in the region.
Although Ebonyi remains one of the least indebted states in absolute terms, its borrowing trajectory signals an emerging risk accumulation pattern. The rapid increase in external borrowing suggests an expansionary fiscal cycle that is not yet fully matched by corresponding revenue growth or institutional absorptive capacity.
From a PFM standpoint, this raises concerns about the strength of project appraisal systems, medium-term expenditure frameworks, and the linkage between borrowing and capital project execution. Without strong institutional anchoring, rising external debt risks becoming decoupled from productive outcomes.
*Enugu: Dual-Phase Fiscal Cycle of Expansion and Correction*
Enugu presents the most complex fiscal trajectory in the region, combining recent expansionary borrowing behaviour with emerging consolidation dynamics.
Domestic debt declined from ₦194,715,560,275.82 to ₦157,603,315,151.74, a reduction of 19.06 percent. External debt also declined from $114,347,639.58 to $99,878,558.55, a reduction of 12.65 percent within the June to December 2025 window.
However, this short-term adjustment must be interpreted within a broader fiscal cycle. Since the assumption of office in 2023, Enugu has experienced a phase of expansionary borrowing across both domestic and external channels, driven by development financing pressures and capital project ambitions. The 2025 reduction therefore represents a corrective or stabilisation phase rather than a linear consolidation trajectory.
From a Public Financial Management perspective, Enugu reflects a dual-phase fiscal cycle. The first phase is expansionary, characterised by accelerated borrowing to support infrastructure and development priorities. The second phase, visible in the current data period, reflects emerging fiscal tightening and liability management.
Governance-wise, Enugu is not simply a legacy debt case but a state navigating the tension between development-led borrowing and evolving fiscal consolidation pressures. The central question is whether current adjustments represent sustained discipline or cyclical correction within an earlier expansionary phase.
*Imo: High Debt, Gradual Domestic Consolidation, and Rising External Exposure*
Imo’s domestic debt declined from ₦90,506,089,211.59 to ₦83,745,419,297.25, a reduction of 7.47 percent between June and December 2025. External debt increased from $107,672,568.13 to $117,076,815.81, a rise of 8.74 percent over the same period.
This reflects a mixed fiscal pattern rather than a purely substitution-driven adjustment. While external borrowing is increasing, Imo has maintained a steady reduction in domestic debt in recent years, particularly from 2024, suggesting a more sustained effort at domestic liability management than a single-period snapshot would imply.
From a Public Financial Management perspective, this points to an emerging dual-track strategy. Domestic debt consolidation appears to be improving through repayment discipline or refinancing strategies, while external borrowing is gradually increasing to support fiscal and development needs.
This creates a more nuanced risk profile than simple substitution. Imo is undergoing progressive rebalancing of debt sources, rather than abrupt risk transfer. However, the increasing reliance on external financing heightens exposure to exchange rate volatility, making long-term fiscal sustainability dependent on revenue growth and improved debt management coordination.
*Debt Stock, Fiscal Space, and Sustainability Pressures*
When both domestic and external debt stocks are considered, Enugu emerges as the most indebted state, followed by Imo. Abia occupies a mid-range position, while Anambra and Ebonyi carry relatively lower total debt burdens.
However, fiscal sustainability depends less on debt stock and more on fiscal space, defined as the capacity to service debt without undermining development expenditure. States with weak internally generated revenue and high dependence on federal transfers face increasing pressure as external debt expands.
Exchange rate depreciation further amplifies repayment burdens, particularly for states with rising external exposure. Without stronger revenue systems and expenditure efficiency reforms, even moderate debt levels can become structurally constraining.
*Transparency, Accountability, and Debt Governance*
The divergence in debt trajectories raises important governance questions regarding transparency, legislative oversight, and debt disclosure systems across states. Differences in borrowing patterns may reflect variations in the strength of Public Financial Management institutions, including debt recording systems, legislative scrutiny, and public reporting practices.
In stronger governance systems, borrowing is anchored in debt sustainability analysis and transparent approval processes. Where these systems are weaker, debt accumulation may become less visible and less tightly linked to development priorities.
The increasing reliance on external borrowing further heightens the importance of transparency around loan conditions, project linkages, and implementation reporting.
*Debt and Sustainable Development Linkages*
At the subnational level, debt must ultimately be assessed through its contribution to sustainable development outcomes. Borrowing is justified only when it supports capital formation, infrastructure delivery, and measurable improvements in human development indicators.
The current reconfiguration raises a critical question of whether rising external debt is translating into productive investment or primarily financing fiscal gaps. Without strong linkage between borrowing and outcomes, debt risks becoming a liability rather than a development accelerator.
From a Sustainable Development Goal perspective, the issue is not debt itself, but its developmental productivity and alignment with long-term growth objectives.
*The Bigger Picture: A Fragmented Subnational Fiscal System*
Three structural shifts define the South-East debt landscape between June and December 2025.
First, there is a shift from domestic to external borrowing driven by cost differentials and macroeconomic constraints. Second, there is a transition from interest rate risk toward exchange rate risk, fundamentally altering fiscal exposure profiles. Third, there is increasing divergence in fiscal cycles across states, ranging from consolidation (Anambra), substitution (Imo), expansion-correction cycles (Enugu), emerging risk accumulation (Ebonyi), and institutional inertia (Abia).
Together, these dynamics reflect a fragmented subnational fiscal system where outcomes are increasingly shaped by governance capacity and institutional strength rather than uniform policy direction.
*Forward-Looking Risk Scenarios*
If current trends persist, continued naira depreciation would significantly increase debt servicing costs for states with rising external exposure, particularly Ebonyi and Imo. A reduction in domestic interest rates could alter substitution incentives and partially reverse current borrowing patterns.
If revenue growth remains weak, increasing debt service obligations may crowd out capital expenditure and social investment. Conversely, if borrowed funds are effectively deployed into productive infrastructure and revenue-generating assets, states may strengthen long-term fiscal resilience.
Ultimately, divergence in outcomes will depend on governance quality, PFM strength, and execution capacity.
*Conclusion: Debt Reconfiguration Without Institutional Alignment Is Not Reform*
The South-East’s debt dynamics between June and December 2025 reflect a transitional phase in subnational Public Financial Management rather than a completed reform process. While domestic debt reduction is widespread, it is being offset by rising external exposure in most states, resulting in a reconfiguration rather than a reduction of fiscal risk.
True fiscal sustainability requires more than shifts between debt instruments. It demands integrated Public Financial Management systems, strong governance oversight, transparent borrowing practices, and a clear linkage between debt and development outcomes.
Without these institutional anchors, current fiscal adjustments risk remaining responses to macroeconomic pressure rather than durable pathways to sustainable development.
By Prof. Chiwuike Uba, Ph.D.