States collectively spent about ₦235.58 billion on servicing external debt obligations in the first half of 2025. This is according to an analysis of the data from the Federal Account Allocation Committee (FAAC) disbursement released by the National Bureau of Statistics (NBS).
The amount represents a sharp increase of ₦95.65 billion or 68.4 per cent when compared with the ₦139.92 billion recorded in the corresponding period of 2024, showing the mounting pressure of dollar-denominated debt repayments on state finances in the wake of the naira’s depreciation.
It is crucial to note that the Federal Government undertakes external debt servicing on behalf of the states through an Irrevocable Standing Payment Order arrangement, which authorises automatic deductions from their monthly FAAC allocations.
Under this process, once an external loan has been approved and a subsidiary agreement executed, the Office of the Accountant-General of the Federation, working with the Federal Ministry of Finance and the Central Bank of Nigeria, deducts the agreed debt service amount before releasing allocations to the states.
According to an analysis of data done by The PUNCH, January 2025 began with a hefty outflow of ₦40.09 billion towards external debt servicing, a sum that dwarfs the ₦9.88 billion paid in the same month of 2024. This represented a year-on-year jump of more than 305 per cent and was the highest single-month repayment in the first half of the year.
In February, the states collectively paid ₦39.10 billion, a figure which, although slightly lower than January’s, was still markedly higher than the ₦24.53 billion disbursed in February 2024, representing a 59.5 per cent increase.
March 2025 recorded the same ₦39.10 billion, marginally lower than the ₦40.41 billion paid in March 2024, reflecting the unusual spike that occurred in that month last year when some states made large payments to clear maturing obligations.
From April to June 2025, the pattern remained unchanged, with each month posting exactly ₦39.10 billion in debt servicing outflows, suggesting relative stability of the local currency in the second quarter of 2025. This represents an 80.1 per cent rise compared with the ₦21.70 billion paid in each of those months in 2024.
Lagos State, long acknowledged as the country’s economic nerve centre, retained its position as the single largest contributor to the overall debt servicing bill, remitting a total of ₦49.58 billion in the first six months of 2025. This marks a 52.8 per cent increase from the ₦32.44 billion recorded in the same period last year.
The size of Lagos’s foreign debt repayment, more than double that of any other state, reflects both its long-standing borrowing profile for large-scale infrastructure projects and the impact of exchange rate weakness on dollar-linked obligations.
Rivers State followed with ₦26.34 billion, a leap from just ₦4.62 billion in the first half of 2024, representing an increase of more than 470 per cent. Kaduna State ranked third with ₦24.47 billion, a modest six per cent rise from the ₦23.09 billion paid last year.
Ogun State came fourth with ₦12.57 billion, nearly triple the ₦4.29 billion recorded in the first half of last year, while Edo State completed the top five with ₦10.18 billion, a 72.6 per cent increase on the ₦5.90 billion paid in 2024.
Collectively, these five states spent ₦123.14 billion, accounting for about 52.3 per cent of all external debt servicing payments made by the 36 states in the first half of 2025, highlighting the concentration of foreign debt exposure in a small group of subnationals.
At the lower end of the scale, Jigawa State recorded the smallest external debt servicing bill at ₦1.39 billion in the first half of 2025, a 54.3 per cent increase from ₦900.54 million in the same period of 2024. Benue followed with ₦1.44 billion, up 62.1 per cent from ₦890.16 million last year, while Yobe paid ₦1.46 billion, representing a 77.0 per cent rise from ₦823.59 million in 2024.
Borno State recorded ₦1.52 billion, up 128.1 per cent from ₦668.07 million, while Zamfara paid ₦1.56 billion, 75.0 per cent higher than the ₦891.82 million recorded in the same period last year. Plateau also featured among the states with comparatively low repayments at ₦1.81 billion, though this was 125.8 per cent more than the ₦803.28 million paid in 2024.
While these states maintain smaller foreign loan portfolios than their higher-ranked counterparts, the sharp year-on-year increases underline the nationwide effect of exchange rate depreciation on the cost of servicing external debt.
The data reveal interesting regional patterns. In the South-West, Lagos and Ogun lead, reflecting an aggressive use of foreign loans to fund infrastructure and other development projects, often at concessional rates but with significant exposure to exchange rate fluctuations.
In the South-South, Rivers and Edo have both posted large increases, while Cross River remained high at ₦9.82 billion, up 24.8 per cent from ₦7.87 billion in 2024. In the North, Kaduna remains the largest payer, while Bauchi recorded ₦8.13 billion in repayments, up 28.5 per cent from ₦6.33 billion last year.
The presence of Cross River, Bauchi, and other non-megacity states in the higher ranks shows that significant foreign debt is not limited to Nigeria’s most industrialised subnational economies.
The effect of the exchange rate on these figures is significant. Since most external debts are denominated in foreign currencies, a weaker naira increases the local currency cost of servicing those debts even if the actual amount owed in dollars or other foreign currencies remains unchanged.
This increase in the naira cost without any change in the foreign currency obligation places heavy strain on the budgets of states, especially those with limited capacity to raise internally generated revenue.
Seven states spent an average of 190 per cent of their Internally Generated Revenue on debt servicing in the first quarter of 2025. Data from the Q1 2025 Budget Implementation Reports of Bayelsa, Adamawa, Benue, Niger, Kogi, Taraba, and Bauchi states show that debt service expenditure in each of the states exceeded their IGR, in some cases by more than 300 per cent.
The trend, when compared with figures from the preceding quarter (Q4 2024), also reflects a sharp quarter-on-quarter surge in debt service cost, which rose by approximately 51 per cent across the states reviewed.
Seven Nigerian states spent a total of ₦98.71 billion on debt servicing in Q1 2025, marking a sharp increase of ₦33.48 billion or 51 per cent compared to the ₦65.24 billion recorded in the previous quarter.
For many, debt servicing now consumes a significant portion of their monthly allocations from the FAAC, leaving less room for recurrent expenditure and capital projects. A comparison with the 2024 figures shows some notable shifts in the rankings. Last year, Lagos, Kaduna and Cross River were the top three states in terms of external debt servicing, followed by Bauchi and Edo. This year, Rivers and Ogun have entered the top five, displacing Cross River and Bauchi.
Economists warn that without a significant increase in revenue generation, the rising debt service burden could crowd out spending on essential services and infrastructure.
The PUNCH