Nigeria’s 36 states paid a combined N455.38bn to service foreign debts in 2025, marking a sharp increase from the N362.08bn recorded in 2024, according to Federation Accounts Allocation Committee (FAAC) figures released by the National Bureau of Statistics and analysed by The PUNCH.
The year-on-year rise of N93.30bn represents a 25.77 per cent increase, indicating that states surrendered a larger portion of their monthly FAAC allocations to external loan repayments in 2025, further squeezing funds available for salaries, infrastructure and routine governance.
Monthly deductions in 2025 followed a step-like pattern. Foreign debt service stood at N40.09bn in January before dipping slightly to N39.10bn in February. The figure remained steady from March through July, suggesting largely fixed and predictable deductions.
Another reduction occurred in August, when payments dropped to N36.14bn, a level that persisted through the rest of the year.
This contrasts with 2024, when deductions fluctuated more sharply. Payments rose from N9.88bn in January to a peak of N40.41bn in March, fell to N21.70bn between April and July, then climbed again to N40.09bn from August through December.
Under FAAC’s framework, foreign debt service is deducted at source to meet states’ external loan obligations. While this “first-line charge” guarantees repayment to creditors, it reduces the discretionary funds available to state governments, especially during periods of weak revenue inflows.
Lagos, Rivers, Kaduna top list
Debt servicing was heavily concentrated among a few states, with the top 10 accounting for about 68.57 per cent of the national total.
Lagos recorded the highest deductions at N92.80bn in 2025, up from N72.32bn in 2024 — an increase of 28.33 per cent. The state alone contributed about one-fifth of total foreign debt service nationwide.
Rivers followed with N48.58bn, more than double its 2024 figure of N23.13bn, reflecting a 110.02 per cent jump. Kaduna ranked third at N47.93bn, slightly above its N45.59bn in 2024.
Ogun also posted a sharp increase, with deductions rising from N11.99bn to N25.20bn, representing a 110.22 per cent surge. Cross River paid N21.01bn, while Oyo recorded N20.17bn.
Other states in the top 10 include Edo (N18.70bn), Bauchi (N16.85bn), Kano (N10.63bn) and Ebonyi (N10.37bn), the latter posting one of the fastest growth rates at over 53 per cent.
Regional breakdown
By geopolitical zones, the South-West bore the heaviest burden, accounting for N162.77bn or 35.74 per cent of total foreign debt service, driven largely by Lagos alongside Ogun, Oyo, Osun, Ondo and Ekiti.
The South-South followed with N100.37bn (22.04 per cent), supported by Rivers, Edo, Cross River, Delta, Akwa Ibom and Bayelsa.
The North-West recorded N81.97bn (18.00 per cent), while the North-East accounted for N42.42bn (9.32 per cent). The South-East posted N40.20bn (8.83 per cent), and the North-Central recorded the lowest at N27.65bn (6.07 per cent).
Concerns over fiscal pressure
The acting Director of Communication and Stakeholders Management at the Nigeria Extractive Industries Transparency Initiative (NEITI), Mrs Obiageli Onuorah, warned that rising debt deductions are putting pressure on state finances despite record FAAC disbursements.
She noted that several heavily indebted states receive relatively lower allocations, raising concerns about debt-to-revenue ratios and fiscal sustainability.
Economists have also cautioned that mounting debt service obligations could crowd out spending on essential services and development projects unless states boost revenues.
Director and Chief Economist at Proshare Nigeria LLC, Teslim Shitta-Bey, said many governments rely too heavily on borrowing without properly managing their balance sheets.
“Borrowing might seem like an easy way to run operations, but it is not necessarily the right approach,” he said, urging states to explore longer-term financing options and better asset management.
He also advocated greater use of revenue bonds and improved monetisation of public assets.
Similarly, macroeconomic analyst Dayo Adenubi stressed the need for stronger internally generated revenue through improved tax collection, higher consumption to boost Value Added Tax receipts, and more efficient property and transport levies.
According to him, sustainable revenue growth, alongside improved service delivery, remains key to easing the debt burden on subnational governments.
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