States across Nigeria spent a total of N235.58 billion on servicing external debts in the first half of 2025, according to data from the National Bureau of Statistics (NBS) and analysed by The PUNCH.
This figure marks a sharp 68.4% increase (N95.65bn) compared to the N139.92bn recorded in the same period of 2024. The surge is largely due to the naira’s depreciation, which has increased the local currency cost of repaying dollar-denominated debts.
How External Debt Servicing Works
The Federal Government handles external debt servicing for states through an Irrevocable Standing Payment Order (ISPO), which allows deductions from each state’s monthly FAAC allocations. Once a foreign loan is approved and formalised, repayments are automatically deducted by the Office of the Accountant-General, Ministry of Finance, and the CBN before funds are released to states.
Monthly Breakdown
- January 2025: N40.09bn — over 305% increase from N9.88bn in Jan 2024.
- February: N39.10bn — up 59.5% from N24.53bn.
- March: N39.10bn — slightly lower than N40.41bn in 2024.
- April – June: N39.10bn monthly — showing stability but still 80.1% higher than the N21.70bn monthly average in Q2 2024.
Top 5 Highest Paying States (H1 2025)
- Lagos – N49.58bn (↑52.8% from N32.44bn)
- Rivers – N26.34bn (↑470% from N4.62bn)
- Kaduna – N24.47bn (↑6%)
- Ogun – N12.57bn (↑193% from N4.29bn)
- Edo – N10.18bn (↑72.6%)
These five states accounted for over half (52.3%) of the total debt servicing costs.
States with Lowest Debt Payments
- Jigawa – N1.39bn (↑54.3%)
- Benue – N1.44bn (↑62.1%)
- Yobe – N1.46bn (↑77%)
- Borno – N1.52bn (↑128.1%)
- Zamfara – N1.56bn (↑75%)
- Plateau – N1.81bn (↑125.8%)
Even these lower-tier states saw steep increases, reflecting how currency depreciation has impacted all regions.
Regional Insights
- South-West: Lagos and Ogun lead with high external debt usage, largely for infrastructure.
- South-South: Rivers, Edo, and Cross River saw major increases.
- North: Kaduna remains the top debtor, with Bauchi also notable (N8.13bn, ↑28.5%).
Interestingly, non-industrial states like Cross River and Bauchi also rank high, indicating foreign debt isn’t limited to wealthier regions.
Fiscal Pressure Mounts
Many states are now using large portions of their FAAC allocations to service debt. Seven states — including Bayelsa, Benue, Adamawa, Niger, Kogi, Taraba, and Bauchi — spent an average of 190% of their IGR on debt servicing in Q1 2025. In some cases, debt payments were over 300% of IGR.
Overall, these seven states paid N98.71bn in Q1 2025 alone — a 51% jump from N65.24bn in Q4 2024.
Economists Raise Red Flags
Experts warn that without better revenue strategies, rising debt service costs could severely limit spending on basic services and infrastructure.
Teslim Shitta-Bey, Chief Economist at Proshare Nigeria, noted that most governments fail to manage their balance sheets effectively. He stressed the need for:
- Longer-term, equity-style debt structures
- A national asset register to support capital raising
- More use of revenue bonds over general obligation bonds
NEITI (Nigeria Extractive Industries Transparency Initiative) also flagged the issue, pointing out that many states with high debt repayments actually receive lower FAAC allocations, creating a sustainability risk.
Dayo Adenubi, a macroeconomic analyst, urged states to boost internally generated revenue (IGR) by:
- Raising consumption to increase VAT
- Enforcing property and transport-related taxes
- Ensuring transparency and service delivery to maintain tax compliance