Nigeria’s oil-producing states have recorded a significant reduction in domestic debt, amounting to N610.84bn, between June 2023 and March 2025, thanks to record inflows from the 13 per cent derivation fund.
This fiscal relief comes as the federal principle allocates a share of oil revenues directly to the producing states, providing a crucial lifeline for managing debts and funding development projects.
According to subnational domestic debt data from the Debt Management Office (DMO), the combined debt of the nine oil-producing states stood at N1.66tn in June 2023, representing 28.6 per cent of Nigeria’s total state-level debt of N5.82tn.
By March 2025, this figure had fallen to N1.05tn, a decline of 37 per cent, even as total state debt also dropped to N3.87tn.
Delta State, traditionally the largest recipient of derivation funds, reduced its domestic debt from N465.40bn to N204.72bn, a decrease of over 55 per cent.
Akwa Ibom followed, cutting its obligations by more than 40 per cent, from N199.58bn to N118.21bn. Bayelsa brought down its debt from N134.50bn to N73.53bn, while Imo reduced from N220.83bn to N122.09bn.
Other states also reported declines, with Ondo achieving the sharpest proportional cut, from N74.03bn to just N11.76bn.
However, Rivers State bucked the trend, seeing an increase in domestic debt from N225.51bn to N364.39bn, despite being a top derivation beneficiary.
Analysts attribute this anomaly to rising expenditure pressures that outpaced revenue inflows.
The fiscal impact of debt repayments remains substantial. Between the third quarter of 2023 and the first half of 2025, the nine oil-producing states generated N1.39tn as Internally Generated Revenue (IGR).
Nearly 44 per cent of this revenue was absorbed by debt servicing, highlighting the persistent pressure on states to allocate substantial portions of internally mobilized funds to creditors rather than capital projects.
Rivers State led in IGR generation at N507.23bn, followed by Delta with N250.36bn, Akwa Ibom with N134.81bn, Edo with N132.51bn, and Bayelsa with N101.85bn.
The smaller states—Ondo, Abia, Imo, and Anambra—recorded comparatively modest figures, underscoring ongoing disparities in revenue mobilization capacity.
From July 2023 to June 2025, oil-producing states collectively received N1.67tn under the 13 per cent derivation allocation, according to National Bureau of Statistics data.
Delta State emerged as the largest beneficiary with N520.27bn, followed by Bayelsa with N332.05bn, Akwa Ibom with N330.27bn, and Rivers with N309.77bn.
These top four states received about 90 per cent of the total allocation, leaving the remaining five states with just N140bn.
Monthly disbursements surged during the first half of 2025, with states collectively receiving N688.03bn—nearly double the allocation of the previous half year.
Delta alone earned N202.07bn, while Bayelsa and Akwa Ibom received N146.32bn and N136.26bn respectively. Even smaller producers like Edo and Ondo saw record inflows of N21.53bn and N16.97bn.
Despite these record allocations, critics question the efficiency and transparency of fund utilization.
In Edo State, the PDP’s Chris Nehikhare said residents had yet to see tangible improvements despite growing IGR and derivation inflows.
Similarly, in Delta, civil society groups called for greater transparency in fund management, urging state governments to provide clear accountability for derivation and IGR revenues.
In Anambra, the APC Deputy Publicity Secretary, Chief Godwin Ezeh, condemned the Soludo administration for neglecting oil-producing communities like Ogwuaniocha in Ogbaru Local Government Area.
He argued that despite significant derivation inflows, communities remain underdeveloped, and residents are overtaxed without visible benefits.
Sociopolitical activists in the Niger Delta have called for direct payment of derivation funds to oil-producing communities rather than through state governments, to ensure proper development and prevent misappropriation.
Comrade Austin Ozobo noted that corruption continues to undermine the intended impact of the allocations, leaving critical infrastructure, social services, and livelihoods neglected.
While the 13 per cent derivation fund has provided unprecedented fiscal relief for Nigeria’s oil-producing states, the effectiveness of its utilization remains a pressing concern.
Experts insist that achieving tangible development outcomes will require stronger accountability, better IGR mobilization, and careful planning to ensure that debt reduction translates into visible social and economic improvements across the Niger Delta region.