Nigeria’s 36 states collectively spent ₦235.58 billion servicing external debt in the first half of 2025 — a staggering 68.4% increase compared to ₦139.92 billion recorded in the same period last year.

Fresh analysis of National Bureau of Statistics (NBS) data shows the sharp rise was largely driven by the naira’s persistent weakness, which inflated the local currency cost of dollar-denominated obligations. The figures, drawn from Federal Account Allocation Committee (FAAC) disbursement records, reveal the mounting fiscal strain on state governments.


Under Nigeria’s Irrevocable Standing Payment Order (ISPO) framework, the Federal Government deducts agreed debt service amounts from states’ monthly FAAC allocations before releasing funds. This ensures lenders are paid on time but leaves states with less cash for salaries, infrastructure, and social services.

The repayment pattern in 2025 highlights the severity of the situation. January alone saw ₦40.09 billion withdrawn from FAAC allocations for external debt — a more than 305% jump from ₦9.88 billion in January 2024, making it the highest single-month payment in H1 2025. February and March each recorded ₦39.10 billion in deductions, with similar levels maintained in April, May, and June.


Lagos State topped the list, paying ₦49.58 billion — over twice the amount of any other state. This represents a 52.8% increase from ₦32.44 billion in H1 2024, reflecting its heavy borrowing for infrastructure and exposure to foreign exchange risk.

Rivers State followed with ₦26.34 billion, a massive 470% jump from just ₦4.62 billion last year.

Kaduna State came third with ₦24.47 billion, while Ogun and Edo completed the top five with ₦12.57 billion and ₦10.18 billion respectively.


Collectively, these five states accounted for over 52% of all foreign debt servicing payments in the first half of 2025.

Smaller States Not Spared

Even states with modest loan portfolios saw steep percentage increases:

Jigawa paid ₦1.39 billion (up 54.3%)

Benue paid ₦1.44 billion (up 62.1%)

Borno paid ₦1.52 billion (up 128.1%)


This shows that currency depreciation impacts every state, regardless of debt size.

The South-West’s Lagos and Ogun dominate repayments due to infrastructure funding via concessional loans. In the South-South, Rivers and Edo posted sharp increases, while Cross River remains high at ₦9.82 billion. In the North, Kaduna leads, but Bauchi’s ₦8.13 billion also ranks it among the highest payers.


The debt burden is worsened by weak internally generated revenue (IGR). Earlier in 2025, seven states — Bayelsa, Adamawa, Benue, Niger, Kogi, Taraba, and Bauchi — spent an average of 190% of their IGR on debt servicing in Q1, meaning they borrowed or relied almost entirely on FAAC to meet obligations.



Economist Teslim Shitta-Bey warned that poor balance sheet management is fuelling unsustainable borrowing. He advised states to consider long-term debt instruments and explore revenue-backed bonds instead of general obligation bonds.

Macroeconomic analyst Dayo Adenubi urged states to boost VAT collections and strengthen property tax enforcement while delivering visible public services to maintain taxpayer compliance.

Meanwhile, the Nigeria Extractive Industries Transparency Initiative (NEITI) raised concerns that some of the most indebted states receive below-average FAAC allocations, creating a high debt-to-revenue ratio and threatening fiscal stability.


Nigeria’s rising state-level debt servicing burden mirrors challenges at the federal level. With most loans denominated in foreign currency, a weaker naira pushes repayment costs higher even when the principal in dollars remains unchanged. Without urgent reforms to grow state revenues and curb excessive borrowing, analysts warn that debt costs could crowd out spending on health, education, and infrastructure — slowing development across the country.