States paid N455.38bn in foreign debt service in 2025, up from N362.08bn in 2024, according to Federation Accounts Allocation Committee figures released by the National Bureau of Statistics and obtained and analysed by The PUNCH.
The year-on-year comparison indicates that subnational governments’ foreign debt deductions rose by N93.30bn, representing a 25.77 per cent increase in 2025 over the prior year.
In plain terms, states collectively lost a larger share of their FAAC inflows to external loan repayments and related obligations in 2025 than in 2024, tightening the fiscal space available for salaries, capital projects, and routine governance.
The monthly pattern in 2025 also shows step-downs rather than a smooth curve. Total foreign debt service across the 36 states stood at N40.09bn in January, before easing to N39.10bn in February, a month-on-month drop of N994.96m, or 2.48 per cent.
From March through July, the national total held steady at N39.10bn each month, suggesting a stretch of largely fixed, predictable deductions. The next big shift came in August, when total deductions fell again to N36.14bn, down N2.95bn or 7.56 per cent from July.
The lower level then persisted through September, October, November, and December, each at N36.14bn. That step pattern contrasts with 2024, when the totals swung more sharply early in the year before settling into long flat runs.
States’ foreign debt service was N9.88bn in January 2024, then jumped to N24.53bn in February and peaked at N40.41bn in March. The total then dropped to N21.70bn in April and stayed flat at that level through May, June, and July.
A second step-up arrived in August 2024, when deductions rose to N40.09bn, and that figure held through the last five months of the year.
Against that backdrop, 2025 looked like a year of smaller but still significant recalibration, with two key reductions and long stretches of stable deductions.
Foreign debt service in the FAAC context refers to deductions made at source from allocations to meet states’ external loan repayment obligations. It is part of the “first line charge” culture that protects creditors and ensures repayments are prioritised, but it also means states have less discretionary cash to deploy, particularly in months where federation revenue is under pressure.
A closer look at the states with the largest foreign debt service burdens in 2025 shows a strong concentration. The top 10 states alone accounted for about 68.57 per cent of total foreign debt service in the year, showing how external debt repayment exposure is heavily skewed toward a handful of large borrowers.
Lagos topped the table, with N92.80bn deducted in 2025, up from N72.32bn in 2024. That was an increase of N20.49bn or 28.33 per cent, meaning roughly one-fifth of the entire national total for 2025 came from Lagos alone, at 20.38 per cent of all state foreign debt service.
Rivers followed, recording N48.58bn in 2025 against N23.13bn in 2024. The year-on-year jump of N25.45bn represented a steep 110.02 per cent increase, making Rivers one of the most notable movers in the data.
Kaduna ranked third at N47.93bn in 2025, compared with N45.59bn in 2024. Its foreign debt service rose by N2.34bn, a more modest 5.13 per cent increase, but the absolute figure remained high enough to keep Kaduna among the biggest contributors nationally.
In fourth place was Ogun, with deductions totalling N25.20bn in 2025, up from N11.99bn in 2024. That translated into a N13.21bn increase or 110.22 per cent, effectively meaning Ogun’s foreign debt service more than doubled year-on-year.
Cross River ranked fifth with N21.01bn in 2025, up from N17.10bn in 2024. The N3.91bn increase represented 22.86 per cent, keeping Cross River among the higher external repayment states.
Oyo ranked sixth, posting N20.17bn in 2025, up from N17.85bn in 2024. Its foreign debt service rose by N2.32bn, a 12.98 per cent increase. Edo came seventh with N18.70bn in 2025, compared with N16.73bn in 2024. The state recorded a N1.97bn rise, translating to 11.78 per cent.
Bauchi ranked eighth at N16.85bn in 2025, up from N13.75bn in 2024. That is an increase of N3.10bn, representing 22.58 per cent. Kano placed ninth, with N10.63bn in 2025 compared with N8.53bn in 2024. The difference of N2.10bn represented 24.67 per cent growth.
Rounding out the top 10 was Ebonyi, where foreign debt service rose to N10.37bn in 2025 from N6.77bn in 2024. The increase of N3.60bn was 53.09 per cent, placing Ebonyi among the fastest growers in the top bracket.
Beyond the top 10, the pattern across the remaining states still points to broad-based pressure. Several states posted multi-billion-naira annual totals even outside the leading group, reflecting how external debt servicing has become a routine and material component of FAAC deductions for many governments.
When the figures are viewed through the geopolitical lens, the concentration remains clear. The South-West recorded the highest foreign debt service in 2025 at N162.77bn, accounting for 35.74 per cent of the national total. This zone’s dominance was driven largely by Lagos, alongside sizeable deductions in Ogun, Oyo, Osun, Ondo, and Ekiti.
The South-South ranked second, with N100.37bn, or 22.04 per cent of total foreign debt service, in 2025. The zone’s total was supported by significant deductions in Rivers, Edo, Cross River, Delta, Akwa Ibom, and Bayelsa, showing that the external debt repayment burden is not limited to one or two standout states.
The North-West came third at N81.97bn, representing 18.00 per cent of the national total. Kaduna’s high deductions played a major role, complemented by Kano, Katsina, Kebbi, Jigawa, Sokoto, and Zamfara.
Outside the top three, the North East recorded N42.42bn, or 9.32 per cent, reflecting sizable deductions in states such as Bauchi, Adamawa, Borno, Gombe, Taraba, and Yobe. The South-East posted N40.20bn, about 8.83 per cent, excluding Edo, but the region’s total was anchored by states such as Imo, Enugu, Abia, Anambra, and Ebonyi.
The North Central recorded the lowest among the six zones at N27.65bn or 6.07 per cent, covering Benue, Kogi, Kwara, Nasarawa, Niger, and Plateau.
In a recent statement, the acting Director of Communication and Stakeholders Management at the Nigeria Extractive Industries Transparency Initiative, Mrs Obiageli Onuorah, noted that states face financial strain due to debt repayments, despite record-high disbursements from the Federation Accounts Allocation Committee.
According to the statement, a NEITI report showed that several states with high debt burdens also ranked lower in FAAC allocations, raising concerns about their fiscal sustainability and their ability to fund critical projects.
“The report noted that many states with high debt ratios were in the lower half of the FAAC allocation rankings but ranked higher for debt deductions, raising concerns about their debt-to-revenue ratios and overall fiscal health,” the statement read.
Also, economists have warned that without a significant increase in revenue generation, the rising debt service burden could crowd out spending on essential services and infrastructure.
The Director and Chief Economist at Proshare Nigeria LLC, Teslim Shitta-Bey, earlier warned that the rising debt burden on Nigeria’s subnational governments could challenge their fiscal stability in the coming years.
He stressed that most state governments, along with the Federal Government, had failed to manage their balance sheets effectively. Speaking to The PUNCH, Shitta-Bey said, “The challenge here is that most of the governments, including the Federal Government, are unable to manage their balance sheets properly. While borrowing might seem like an easy way to run operations, it is not necessarily the right approach.”
According to Shitta-Bey, borrowing should not be the default solution for governments. “Governments could consider longer-term debt structures that resemble equity, which might actually be more beneficial in the long run,” he explained.
He also called for a comprehensive register of national assets to help states raise capital. He used the example of the National Stadium, which had not been used for major activities for a while.
Shitta-Bey lamented the underuse of state revenue bonds, which were originally designed to generate revenue. “States need to focus on raising revenue bonds instead of general obligation bonds,” he said.
A macroeconomic analyst, Dayo Adenubi, also emphasised the need for states to take more targeted steps toward boosting internally generated revenue as they grapple with rising debt obligations and constrained federal transfers.
According to Adenubi, one key strategy is to raise consumption levels in order to increase Value Added Tax collections. He also stressed the importance of improving tax collection within state corridors, especially by enforcing taxes such as property taxes and transport-related levies, while ensuring that governments deliver on the social contract to maintain citizen trust and compliance.
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