Subnational governments in Nigeria paid N455.38 billion in foreign debt service in 2025, up from N362.08 billion in 2024, according to data from the Federation Accounts Allocation Committee (FAAC), as analysed by The PUNCH. This 25.77% year-on-year increase reflects a growing share of states’ allocations being directed to external loan repayments, constraining funds available for salaries, capital projects, and routine governance.
Analysis of monthly patterns shows stepwise reductions and prolonged stability in 2025, contrasting with sharper fluctuations in 2024. Deductions peaked at N40.09 billion in January, fell to N36.14 billion from August to December, and remained largely predictable, indicating a more calibrated debt service schedule.
The burden is heavily concentrated among a handful of states. Lagos led the nation with N92.80 billion, accounting for 20.38% of the total, followed by Rivers (N48.58bn), Kaduna (N47.93bn), Ogun (N25.20bn), and Cross River (N21.01bn). Other top contributors include Oyo, Edo, Bauchi, Kano, and Ebonyi, all posting multi-billion-naira deductions, with some states doubling their repayments compared to 2024.
Regionally, the South-West recorded the highest foreign debt service at N162.77bn (35.74%), driven largely by Lagos, Ogun, Oyo, Osun, Ondo, and Ekiti. The South-South followed with N100.37bn (22.04%), while the North-West contributed N81.97bn (18%). The North-East, South-East, and North-Central recorded smaller but still significant deductions, highlighting widespread fiscal pressure across the federation.
NEITI has warned that states face financial strain despite record FAAC disbursements. Acting Director Obiageli Onuorah noted that states with high debt burdens often ranked lower in FAAC allocations, raising concerns about debt-to-revenue ratios and fiscal sustainability.
Economists echoed these concerns, urging governments to prioritise revenue generation over borrowing. Teslim Shitta-Bey, Director and Chief Economist at Proshare Nigeria LLC, stressed that poor balance sheet management by states and the Federal Government is exacerbating the debt challenge. He recommended long-term debt structures resembling equity and better utilisation of state assets and revenue bonds to generate capital.
Dayo Adenubi, a macroeconomic analyst, highlighted strategies for boosting internally generated revenue, including raising consumption to increase VAT collections, improving property and transport tax enforcement, and ensuring governments deliver visible services to maintain citizen trust and compliance.
The rising foreign debt service underscores the urgent need for fiscal prudence, strategic borrowing, and revenue-driven growth to preserve states’ ability to fund essential services and infrastructure development.
