Nigerian States Face Rising Foreign Debt Repayments in 2025
Nigeria's 36 states collectively paid N455.38 billion in foreign debt service deductions in 2025, according to data released by the National Bureau of Statistics from the Federation Accounts Allocation Committee. This amount represents a significant increase of 25.77% from the N362.08 billion deducted in 2024, marking a rise of N93.30 billion year-on-year.
Sharp Increase in Debt Service Deductions
The foreign debt service deductions are treated as first-line charges, meaning they are automatically deducted at source before funds reach state coffers. This process leaves state governments with reduced allocations to fund essential public services such as salaries, infrastructure projects, and other governmental operations. The deductions primarily service loans owed to external creditors, including the World Bank, International Monetary Fund, China, and other multilateral and bilateral lenders.
Monthly Breakdown and Yearly Comparison
In 2025, foreign debt service deductions showed a relatively stable pattern, starting at N40.09 billion in January and slightly decreasing to N39.10 billion in February. From March to July, deductions remained flat at N39.10 billion monthly, before dropping to N36.14 billion in August and persisting at that level through December.
In contrast, 2024 exhibited more volatility, with deductions beginning at N9.88 billion in January, jumping to N24.53 billion in February, and peaking at N40.41 billion in March. After falling to N21.70 billion between April and July, they rose again to N40.09 billion from August to December. Despite the stability in 2025, the overall annual burden was substantially higher.
Top 10 States Account for Majority of Repayments
The top 10 states accounted for 68.57% of the total foreign debt service in 2025, highlighting a concentration of debt exposure. Here is the detailed breakdown:
- Lagos State led with N92.80 billion, up from N72.32 billion in 2024, representing a 28.33% increase. Lagos alone contributed about one-fifth of all state foreign debt deductions nationwide.
- Rivers State recorded N48.58 billion, more than doubling from N23.13 billion in 2024, a surge of 110%.
- Kaduna State paid N47.93 billion, a modest 5.13% increase from N45.59 billion in the previous year.
- Ogun State saw deductions of N25.20 billion, more than doubling from N11.99 billion in 2024, a rise of 110.22%.
- Cross River State paid N21.01 billion, up 22.86% from N17.10 billion.
- Oyo State recorded N20.17 billion, a 12.98% increase from the previous year.
- Edo State paid N18.70 billion, climbing 11.78% year-on-year.
- Bauchi State saw deductions of N16.85 billion, a 22.58% rise compared to 2024.
- Kano State paid N10.63 billion, with a growth of 24.67%.
- Ebonyi State recorded N10.37 billion, one of the fastest growth rates at 53.09%.
Regional Breakdown of Debt Service
By geopolitical zone, the South-West region recorded the highest foreign debt service at N162.77 billion, accounting for 35.74% of the national total, largely driven by Lagos, Ogun, and Oyo States. The South-South region followed with N100.37 billion or 22.04%, influenced by Rivers, Edo, and Cross River States. The North-West ranked third at N81.97 billion, primarily due to Kaduna and Kano States.
The North-East region recorded N42.42 billion, while the South-East posted N40.20 billion. The North Central region had the lowest total at N27.65 billion.
Concerns Over Fiscal Sustainability
The Nigeria Extractive Industries Transparency Initiative has expressed concerns that several states with high debt deductions rank lower in FAAC allocation receipts, raising red flags about their debt-to-revenue ratios. Economists warn that rising debt service could crowd out spending on essential services if internally generated revenue does not improve significantly.
Teslim Shitta-Bey, Director and Chief Economist at Proshare Nigeria, emphasized that many state governments are not managing their balance sheets effectively. He urged states to rethink borrowing strategies, explore longer-term financing options, and make better use of revenue bonds rather than relying heavily on general obligation debt. Analysts suggest that without stronger revenue mobilization and smarter asset management, subnational fiscal pressures may intensify in the coming years.
This situation underscores the need for prudent fiscal management and diversified revenue streams to ensure sustainable development across Nigerian states.
