Nigeria’s 36 states collectively spent about N235.58bn on servicing external debt in the first half of 2025, marking a 68.4 per cent jump from N139.92bn recorded in the same period last year, analysis of National Bureau of Statistics’ Federal Account Allocation Committee (FAAC) data shows.
The sharp rise an increase of N95.65bn underscores the mounting strain of dollar-denominated debt repayments on state finances in the wake of the naira’s depreciation. Under an Irrevocable Standing Payment Order (ISPO) arrangement, the Federal Government deducts debt servicing sums from FAAC allocations before releasing funds to the states.
January saw the heaviest single-month outflow, N40.09bn, more than quadruple the N9.88bn paid in January 2024. Payments remained high in February (N39.10bn) and March (N39.10bn), before stabilising at N39.10bn monthly between April and June still 80.1 per cent higher than the N21.70bn average for those months last year.
Top Five States by Debt Servicing
- Lagos: N49.58bn (↑52.8%) – largest contributor, driven by large-scale infrastructure loans and FX volatility.
- Rivers: N26.34bn (↑470.2%) – sharpest rise among top payers.
- Kaduna: N24.47bn (↑6%).
- Ogun: N12.57bn (↑192.9%).
- Edo: N10.18bn (↑72.6%).
Together, these states accounted for 52.3 per cent of all external debt repayments in H1 2025.
Lowest Repayments were recorded by Jigawa (N1.39bn), Benue (N1.44bn), Yobe (N1.46bn), Borno (N1.52bn), Zamfara (N1.56bn), and Plateau (N1.81bn). Despite their smaller foreign loan portfolios, most still saw year-on-year increases exceeding 50 per cent, reflecting the nationwide impact of exchange rate depreciation.
Regional Trends show Lagos and Ogun leading the South-West; Rivers and Edo topping the South-South; and Kaduna dominating the North. Notably, states like Cross River (N9.82bn) and Bauchi (N8.13bn) also feature prominently, indicating that heavy foreign debt is not confined to Nigeria’s most industrialised regions.
Economists warn the rising burden is crowding out spending on essential services. Proshare Nigeria LLC’s Chief Economist, Teslim Shitta-Bey, criticised the over-reliance on borrowing and urged adoption of longer-term, equity-like debt structures and better asset utilisation to raise funds.
The Nigeria Extractive Industries Transparency Initiative (NEITI) also flagged fiscal sustainability concerns, noting that several high-debt states ranked low in FAAC allocations. Macroeconomic analyst Dayo Adenubi advised boosting internally generated revenue through improved VAT and property tax enforcement, alongside maintaining public trust through visible service delivery.
The trend mirrors earlier findings that in Q1 2025, seven states spent over 190 per cent of their Internally Generated Revenue on debt servicing, leaving little fiscal room for capital investment and recurrent expenditure.
If current patterns persist, analysts caution that some states may face severe fiscal stress before year-end, unless urgent measures are taken to strengthen revenue mobilisation and restructure debt obligations.
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