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States, FCT external debt nears $5.7bn amid higher FAAC

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Thirty-two states and the Federal Capital Territory’s debt rose to nearly $5.7bn in fresh external loans in 2025, driving a year-on-year surge in subnational foreign debt despite higher inflows from Federation Account Allocation Committee disbursements, an analysis by The PUNCH has shown.

Data from the Debt Management Office indicated that the combined external debt stock of the 36 states and the FCT increased from $4.80bn as of December 31, 2024, to $5.68bn as of December 31, 2025, reflecting a net increase of $884.66m, or 18.43 per cent year-on-year.

A breakdown of the data showed that 33 out of the 37 subnational entities recorded increases in their external debt positions during the period under review, representing 89.19 per cent of the total, while only four states posted declines, accounting for 10.81 per cent.

The scale of the increase shows a continued reliance on external financing by state governments amid fiscal pressures, infrastructure demands, and rising FAAC revenues.

Analysis of year-on-year movements revealed that total increases across the 32 states and the FCT amounted to $944.12m, while total reductions across the four states amounted to $59.46m. The net effect of these opposing movements resulted in the overall increase of $884.66m in the external debt stock.

This indicates that the modest declines recorded in a few states were insufficient to offset the widespread borrowing expansion across most states, with increases outweighing reductions by nearly 16 to 1.

The rise in indebtedness comes at a time when FAAC disbursements to states have improved considerably, fuelled by rising oil prices, gains from naira devaluation, and revenue freed up from petrol subsidy removal.

However, the figures suggest that rather than leveraging these inflows to reduce debt, some states are borrowing even more from foreign sources. The 32 states and FCT, which recorded a $944.12m increase in foreign loans, got about N1.36tn in naira terms using the exchange rate adopted by the DMO for 2025, which is N1,435.2571/$1.

Among the states that recorded declines were Edo, Rivers, Anambra, and Bayelsa. Edo posted the largest reduction, with its external debt falling by $29.02m, representing a 7.58 per cent decrease from $383.05m in 2024 to $354.03m in 2025.

Rivers followed with a decline of $28.69m, or 14.37 per cent, dropping from $199.58m to $170.90m. Anambra recorded a marginal decrease of $1.11m, while Bayelsa’s debt reduced slightly by $0.64m.

Despite these reductions, the overwhelming trend across states was upward. Several states recorded significant increases in both absolute and percentage terms, indicating aggressive borrowing patterns.

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Katsina recorded one of the largest increases in absolute terms, with its external debt rising by $100.16m, nearly doubling from $100.46m in 2024 to $200.62m in 2025, representing a 99.70 per cent increase.

Kaduna also posted a substantial increase of $59.19m, bringing its total external debt to $684.29m, making it one of the most indebted states externally after Lagos.

Kogi’s external debt rose by $66.08m, representing a 126.07 per cent increase, while Niger recorded a $73.38m rise, more than doubling its debt stock with a 109.18 per cent increase. Plateau recorded the highest percentage increase overall at 187.24 per cent, with its debt rising by $60.24m.

Gombe posted one of the highest percentage increases at 168.70 per cent, with its external debt jumping by $55.67m from $33.00m to $88.66m. Benue also recorded a sharp increase of 128.16 per cent, while Yobe’s debt surged by 136.56 per cent, further highlighting the rapid pace of borrowing among several states.

Imo’s external debt rose by $45.64m, representing a 63.90 per cent increase, while Oyo recorded a $34.71m rise, translating to a 65.73 per cent increase. Sokoto’s debt increased by $42.92m, or 84.15 per cent, while Jigawa posted a 95.87 per cent increase, adding $22.38m to its debt stock.

At the lower end of the spectrum, Lagos, which remains the most externally indebted state, recorded only a marginal increase of $4.83m, representing 0.41 per cent growth from $1.17bn in 2024 to $1.17bn in 2025.

The relatively flat growth in Lagos’ external debt suggests a more cautious borrowing approach compared to other states, despite maintaining the largest debt stock.

Cross River’s debt rose by $20.46m to $222.92m, while Bauchi recorded an increase of $33.75m to $220.57m. Ogun’s external debt rose by $24.10m, while Ondo recorded an $8.25m increase.

In the South-East, Ebonyi’s debt rose by $16.94m, while Enugu recorded a $12.83m increase. Abia’s external debt also rose by $5.69m, representing a modest 5.61 per cent increase.

Adamawa posted a $26.03m increase, while Akwa Ibom’s debt rose by $19.90m, representing a 55.97 per cent increase. Delta recorded a $6.28m increase, while Ekiti saw a marginal rise of $1.73m, indicating relatively moderate borrowing activity in those states. The FCT also recorded an increase of $7.31m, representing a 37.53 per cent rise from $19.48m in 2024 to $26.80m in 2025.

Further analysis of the debt composition showed that the bulk of external loans were multilateral, with limited exposure to bilateral and other commercial sources, according to the DMO breakdown.

The sustained increase in external borrowing at the subnational level comes amid rising fiscal constraints, including higher recurrent expenditure and growing infrastructure financing needs, despite higher FAAC revenue.

The PUNCH earlier reported that FAAC allocations to states surged by over N2tn in 2025, according to an analysis of Federation Account disbursement data published by the National Bureau of Statistics and collated by The PUNCH.

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The Federation Account disbursement data show that state governments received a total of N7.315tn from the Federation Account Allocation Committee in 2025, compared with N5.186tn in 2024. The year-on-year increase of roughly N2.13tn represents a jump of about 41 per cent in direct FAAC allocations to states.

When the constitutionally mandated 13 per cent derivation revenue is included, total inflows attributable to states rose to N8.934tn (about N9tn) in 2025, up from N6.533tn in 2024, an increase of N2.4tn or 36.74 per cent.

This surge came amid an increase in total FAAC distributions. Aggregate allocations to the three tiers of government, including derivation, rose from N15.259tn in 2024 to N21.897tn in 2025.

States therefore captured a substantial share of the overall increase, both in absolute terms and as a proportion of total federation revenues. Without the 13 per cent derivation component, states’ N7.315tn allocation in 2025 accounted for about 33.4 per cent of the N21.897tn total FAAC disbursement for the year, compared with roughly 34.0 per cent in 2024.

When derivation revenue is included, total state-linked receipts of N8.934tn represented about 40.8 per cent of total FAAC disbursements in 2025.

The PUNCH also reported that 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 indicated 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.

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.

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“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.

Speaking recently on Channels Television’s Politics Today programme, the Country Director of BudgiT, Vahyala Kwaga, expressed concern that the more FAAC allocations go to states, the more disincentivised they appear to be to boost their internally generated revenue.

Kwaga further said that “Fiscal sustainability requires that states look inward, improving revenue systems, cutting waste, and prioritising infrastructure and human development investments that deliver long-term value.”

Analysts earlier told The PUNCH that continued reliance on foreign loans exposes states to even greater fiscal risks amid a weakening naira.

“Since most of the debts are dollar-denominated, every depreciation of the local currency automatically inflates repayment obligations, forcing states to channel a larger share of their revenues into debt servicing at the expense of development projects,” says a Professor of Economics at the Ekiti State University, Taiwo Owoeye.

Beyond repayment costs, Owoeye noted that heavy external borrowing also undermines states’ financial autonomy.

“By taking on more foreign obligations, many states risk mortgaging future federal allocations to meet repayment schedules, leaving them with little room to respond to emergencies or fund critical sectors such as health, education, and infrastructure,” he explained.

The Director and Chief Economist at Proshare Nigeria LLC, Teslim Shitta-Bey, 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 effectively manage their balance sheets. Speaking recently 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.

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.

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Dangote beats US, ships N757bn jet fuel to Europe – Report reveals

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Dangote Petroleum Refinery exported about 466,000 metric tonnes of jet fuel to Europe in June, valued at an estimated N757bn, overtaking shipments from the United States and others.

This is as Nigerian jet fuel exports to the continent reached their highest level since the country became a net exporter of aviation fuel in 2024.

According to a market report by S&P Global Commodity Insights, the refinery’s exports came as the European jet fuel market turned increasingly bearish following a sharp decline in prices from the highs recorded during the Middle East conflict.

The report stated that flows of jet fuel from Nigeria to Europe rose from 232,000 metric tonnes in May to 466,000 metric tonnes in June, the highest volume exported from the country to Europe since Nigeria became a net exporter of jet fuel in 2024, when the Dangote Refinery commenced aviation fuel production.

The June export volume is equivalent to about 582.5 million litres of jet fuel. At an estimated domestic value of N1,300 per litre, the shipment is worth about N757.25bn.

On the other hand, aviation fuel exports from the United States fell sharply in the past months. The report showed that jet fuel exports from the United States to Europe declined steadily over the same period, falling from a record 818,000 metric tonnes in April to 560,000 metric tonnes in May and further to 399,000 metric tonnes in June, leaving Nigeria as a bigger supplier to Europe during the month.

Commenting on the market, a trader attributed the oversupply partly to increased shipments from Dangote and the United States. “Jet is oversupplied because of high local refinery production; refineries pushed back maintenance to make the most of the high prices.

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“The US and Dangote also shipped large volumes. Now there are some flows resuming through the Suez, too, from the UAE, but let’s see how it goes,” the trader was quoted as saying.

The report noted that the European jet fuel forward curve had weakened significantly after reaching record highs during the Middle East war, as traders now anticipate an oversupplied summer market amid weaker-than-expected aviation demand.

According to Platts, part of S&P Global Commodity Insights, the Northwest Europe jet CIF cargo financial assessment for July dropped to $981.75 per metric tonne on June 30, down sharply from the all-time high of $1,694.25 per metric tonne recorded on March 30.

Similarly, the August contract declined from $1,507.50 per metric tonne on March 30 to $968.25 per metric tonne by June 30.

The report added that Europe could receive even more jet fuel supplies in the coming months as the East-West arbitrage remains attractive, encouraging exporters in the Middle East and India to ship cargoes westward.

While flows from the United Arab Emirates and Kuwait were absent in June, shipments from Saudi Arabia increased to about 106,000 metric tonnes, up from 7,000 metric tonnes in May, while exports from India rose from 129,000 metric tonnes to 197,000 metric tonnes over the same period.

Despite the current oversupply, two European jet fuel traders reportedly told Platts that market conditions would depend largely on developments in the Strait of Hormuz and the pace at which Middle Eastern refineries recover from disruptions caused by the recent conflict.

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They also noted that stronger summer travel demand and refiners’ growing preference to maximise diesel production over jet fuel could gradually help rebalance the aviation fuel market.

Data from the Nigerian Midstream and Downstream Petroleum Regulatory Authority showed that the Dangote refinery exported an estimated 1.66 billion litres of refined petroleum products in April 2026.

This was during the mounting tensions in the Middle East that caused disruption to global fuel supply routes.

An analysis of the NMDPRA’s April 2026 fact sheet showed that the country exported about 513 million litres of premium motor spirit, popularly called ‘petrol’; 534 million litres of automotive gas oil, also known as diesel; and 615 million litres of aviation fuel within the month in April.

The Dangote refinery is the only major functional refinery in Nigeria that currently produces enough refined petroleum products for both local consumption and export.

Nigeria has become a net petrol exporter for the first time in decades due to rising output from the Dangote refinery. The refinery had earlier exported about 434 million litres of petrol in March after domestic production exceeded local consumption levels.

The latest figures underscore Nigeria’s gradual transition from a major importer of refined petroleum products to an export hub within Africa. It was observed that jet fuel exports may rise further with the instability caused by the Middle East crisis, which disrupted traditional supply chains serving Europe and other regions.

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Shell, banks launch $3bn financing for oil contractors

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Shell Nigeria Exploration and Production Company Limited has partnered with nine Nigerian banks to launch a $3bn contract finance facility aimed at improving access to credit for indigenous oil and gas contractors executing projects for the company.

According to a statement, the financing scheme, unveiled on Thursday, is designed to provide credit support to local contractors handling projects for SNEPCo and will be available in both naira and United States dollars.

The participating banks are First Bank, Guaranty Trust Bank, Zenith Bank, Access Bank, United Bank for Africa, Stanbic IBTC, Standard Chartered Bank, First City Monument Bank, and Fidelity Bank.

Speaking at the signing of the Memorandum of Understanding in Lagos, the Managing Director of SNEPCo, Ronald Adams, said the initiative aligns with the objectives of the Nigerian Oil and Gas Industry Content Development Act by promoting greater in-country value retention.

“The initiative reflects the spirit of the Nigerian Oil and Gas Industry Content Development Act, which is aimed at in-country value retention. Our partner banks offer capital and discipline.

“SNEPCo brings contracts and domiciliation of payments that de-risk lending.

On their part, the contractors provide performance. Each is accountable to the others, and the mutual accountability gives the arrangement its strength,” he said.

The Vice President, Finance, Shell Nigeria, CJ Akwaeze, said the financing scheme demonstrates Shell’s commitment to supporting the growth of oil and gas operations in Nigeria.

The Chairman of the Petroleum Technology Association of Nigeria, Wole Ogunsanya, who was represented by Dr Joan Faluyi, described the facility as a major boost for indigenous contractors.

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Ogunsanya lauded the initiative as a “gateway to unlocking contractor financing issues, which will also drive efficiency in contract execution.”

Representatives of the participating banks also commended SNEPCo for introducing the financing arrangement, saying the partnership would strengthen local contractors, and pledged their continued support for the initiative.

SNEPCo said Nigerian companies have continued to play significant roles in its operations and project delivery. It noted that earlier this year, 43 wholly Nigerian companies participated in the turnaround maintenance exercise at the Bonga Floating Production Storage and Offloading vessel out of the 53 companies involved in the exercise.

According to the company, the Contract Finance Facility is expected to further strengthen the capacity of Nigerian companies and enhance value delivery in the operations of Nigeria’s premier deepwater producer.

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Nigeria faces lubricant squeeze as imports tighten globally

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Nigeria may face a lubricant supply squeeze in the coming months as tightening global base oil supplies and rising prices limit imports into West Africa, according to a report by global energy and commodity intelligence firm Argus.

The report, based on insights from Argus’ Head of Base Oil Pricing, Gabriella Twinning, said lower availability of base oils and rising global prices linked to disruptions caused by the US-Iran conflict are reducing offers into the West African market despite the announcement of a peace deal.

It noted that West Africa remains heavily dependent on imported base oils, with average annual imports standing at about 135,752 tonnes over the past five years. According to the report, the Dangote refinery expansion includes a base oil production unit, but the facility has yet to commence operations, leaving the region dependent on imports.

“Lower availability of base oils and rising global prices due to the continued disruption associated with the US-Iran war are curbing offers into the West African market despite a peace deal announcement,” Twinning stated.

On the region’s dependence on imports, Twinning said West Africa is a net importer of base oils, with average imports of around 135,752 tonnes annually over the past five years.

The report disclosed that the last major shipments arrived in March, warning that replacement cargoes are unlikely to be available from exporting countries throughout the summer. “The last large shipments arrived in March, and replenishment cargoes look unavailable from exporting nations over the summer,” she stated.

Explaining the supply constraints, Twinning said, “Bulk European Group I volumes, usually used for engine, marine and industrial oil lubricants and greases, are unavailable following PK Orlen’s five-week maintenance shutdown and restart at the end of May.

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“Bulk volumes out of the US are also limited as refiners service domestic demand and stockpile volumes for hurricane season. Crude changeovers at some Group I US refineries are also hampering output.”

The report noted that Nigerian buyers could switch to alternative grades where product formulations permit. “Nigerian buyers could purchase Group II heavy grades as alternatives to Group I where formulations allow. These are more readily available outside Asia. However, Asian sellers are prioritising higher prices from blenders in South America,” Twinning said.

She further stated that volumes from Russia had also declined as several refineries undergo repair works. According to her, higher spot prices are also discouraging purchases into the region.

“Rising spot prices to record highs in June since the start of the conflict will also make any cargo unattractive to West African buyers given the complicated payment process,” Twinning said.

Warning of the implications for the local market, she added that West African blenders would need to increase ex-tank prices and bid levels to compete with buyers in other regions.

“Demand is rising despite the rainy season, when transport and logistics typically slow. This is because no replenishment cargoes have arrived since March and tanks are running dry,” she noted.

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