Thirty-two states and the Federal Capital Territory’s debt rose to nearly $5.7 billion in fresh external loans in 2025, driving a year-on-year surge in subnational foreign debt despite higher inflows from Federation Account Allocation Committee (FAAC) disbursements.
Data from the Debt Management Office indicated that the combined external debt stock of the 36 states and the FCT increased from $4.80 billion as of December 31, 2024, to $5.68 billion as of December 31, 2025, reflecting a net increase of $884.66 million, or 18.43 per cent year-on-year.
A breakdown of the data showed that 33 out of the 37 subnational entities recorded increases in their external debt positions during the period under review, representing 89.19 per cent of the total, while only four states posted declines, accounting for 10.81 per cent.
The scale of the increase shows a continued reliance on external financing by state governments amid fiscal pressures, infrastructure demands, and rising FAAC revenues.
Analysis of year-on-year movements revealed that total increases across the 32 states and the FCT amounted to $944.12 million, while total reductions across the four states amounted to $59.46 million. The net effect of these opposing movements resulted in the overall increase of $884.66 million in the external debt stock.
This indicates that the modest declines recorded in a few states were insufficient to offset the widespread borrowing expansion across most states, with increases outweighing reductions by nearly 16 to 1.
The rise in indebtedness comes at a time when FAAC disbursements to states have improved considerably, fuelled by rising oil prices, gains from naira devaluation, and revenue freed up from petrol subsidy removal.
However, the figures suggest that rather than leveraging these inflows to reduce debt, some states are borrowing even more from foreign sources. The 32 states and FCT, which recorded a $944.12 million increase in foreign loans, got about ₦1.36 trillion in naira terms using the exchange rate adopted by the DMO for 2025, which is ₦1,435.2571/$1.
Among the states that recorded declines were Edo, Rivers, Anambra, and Bayelsa. Edo posted the largest reduction, with its external debt falling by $29.02 million, representing a 7.58 per cent decrease from $383.05 million in 2024 to $354.03 million in 2025.
Rivers followed with a decline of $28.69 million, or 14.37 per cent, dropping from $199.58 million to $170.90 million. Anambra recorded a marginal decrease of $1.11 million, while Bayelsa’s debt reduced slightly by $0.64 million.
Despite these reductions, the overwhelming trend across states was upward. Several states recorded significant increases in both absolute and percentage terms, indicating aggressive borrowing patterns.
Katsina recorded one of the largest increases in absolute terms, with its external debt rising by $100.16 million, nearly doubling from $100.46 million in 2024 to $200.62 million in 2025, representing a 99.70 per cent increase.
Kaduna also posted a substantial increase of $59.19 million, bringing its total external debt to $684.29 million, making it one of the most indebted states externally after Lagos.
Kogi’s external debt rose by $66.08 million, representing a 126.07 per cent increase, while Niger recorded a $73.38 million rise, more than doubling its debt stock with a 109.18 per cent increase. Plateau recorded the highest percentage increase overall at 187.24 per cent, with its debt rising by $60.24 million .
Gombe posted one of the highest percentage increases at 168.70 per cent, with its external debt jumping by $55.67 million from $33.00 million to $88.66 million. Benue also recorded a sharp increase of 128.16 per cent, while Yobe’s debt surged by 136.56 per cent, further highlighting the rapid pace of borrowing among several states.
Imo’s external debt rose by $45.64 million, representing a 63.90 per cent increase, while Oyo recorded a $34.71 million rise, translating to a 65.73 per cent increase. Sokoto’s debt increased by $42.92 million, or 84.15 per cent, while Jigawa posted a 95.87 per cent increase, adding $22.38 million to its debt stock.
At the lower end of the spectrum, Lagos, which remains the most externally indebted state, recorded only a marginal increase of $4.83 million, representing 0.41 per cent growth from $1.17 billion in 2024 to $1.17 billion in 2025.
The relatively flat growth in Lagos’ external debt suggests a more cautious borrowing approach compared to other states, despite maintaining the largest debt stock.
Cross River’s debt rose by $20.46 million to $222.92 million, while Bauchi recorded an increase of $33.75 million to $220.57 million . Ogun’s external debt rose by $24.10 million, while Ondo recorded an $8.25 million increase.
In the South-East, Ebonyi’s debt rose by $16.94 million, while Enugu recorded a $12.83 million increase. Abia’s external debt also rose by $5.69 million, representing a modest 5.61 per cent increase.
Adamawa posted a $26.03 million increase, while Akwa Ibom’s debt rose by $19.90 million, representing a 55.97 per cent increase. Delta recorded a $6.28 million increase, while Ekiti saw a marginal rise of $1.73 million, indicating relatively moderate borrowing activity in those states. The FCT also recorded an increase of $7.31 million, representing a 37.53 per cent rise from $19.48 million in 2024 to $26.80 million in 2025.
Further analysis of the debt composition showed that the bulk of external loans were multilateral, with limited exposure to bilateral and other commercial sources, according to the DMO breakdown.
The sustained increase in external borrowing at the subnational level comes amid rising fiscal constraints, including higher recurrent expenditure and growing infrastructure financing needs, despite higher FAAC revenue.
The PUNCH