States’ External Debt Servicing Hits N235.58bn in Six Months Amid Naira Depreciation

Nigerian states spent a total of N235.58bn on external debt servicing in the first half of 2025, according to fresh figures from the National Bureau of Statistics (NBS) based on Federal Accounts Allocation Committee (FAAC) disbursement data.

The figure is N95.65bn higher than the N139.92bn recorded in the same period of 2024—an increase of 68.4%—reflecting the mounting cost of dollar-denominated repayments following the naira’s sharp depreciation.

Although states take the loans, the Federal Government handles external debt servicing on their behalf through an Irrevocable Standing Payment Order (ISPO), which allows deductions from states’ FAAC allocations before disbursement. The Office of the Accountant-General, working with the Federal Ministry of Finance and the Central Bank of Nigeria, executes these deductions automatically.

Monthly breakdown
The year began with a significant N40.09bn debt repayment in January 2025—more than four times the N9.88bn paid in January 2024—marking the highest single-month figure in the period.
In February, states paid N39.10bn, up 59.5% from N24.53bn in the same month last year.
March saw another N39.10bn, slightly below March 2024’s N40.41bn, when some states cleared large maturing obligations.
From April through June 2025, repayments remained steady at N39.10bn monthly, representing an 80.1% rise from the N21.70bn paid in each of those months last year.

Top spenders

• Lagos State led the pack, remitting N49.58bn in six months—up 52.8% from N32.44bn in 2024.

• Rivers State followed with N26.34bn, a staggering leap of more than 470% from N4.62bn last year.

• Kaduna State paid N24.47bn, up 6% from N23.09bn in 2024.

• Ogun State spent N12.57bn, almost triple its N4.29bn bill in 2024.

• Edo State rounded out the top five with N10.18bn, a 72.6% jump from N5.90bn.

Together, these five states accounted for over half (52.3%) of all external debt servicing costs by the 36 states during the period.

Lowest repayments
At the other end, Jigawa recorded the smallest repayment—N1.39bn—followed by Benue (N1.44bn), Yobe (N1.46bn), Borno (N1.52bn), Zamfara (N1.56bn), and Plateau (N1.81bn). Despite their relatively low obligations, these states still saw repayment jumps ranging from 54% to 128%, driven largely by the exchange rate effect.

Regional patterns
The South-West saw Lagos and Ogun topping repayments, reflecting years of infrastructure-driven borrowing. In the South-South, Rivers and Edo posted steep increases, while Cross River remained high at N9.82bn, up nearly 25% from last year. In the North, Kaduna led, followed by Bauchi with N8.13bn—a 28.5% rise.

Exchange rate pressure
Since most external debts are in foreign currency, a weaker naira has pushed up the cost in local terms, even when the dollar amount remains unchanged. This has strained state budgets, especially in states with low internally generated revenue (IGR).

Earlier this year, seven states—Bayelsa, Adamawa, Benue, Niger, Kogi, Taraba, and Bauchi—were reported to have spent an average of 190% of their IGR on debt servicing in Q1 2025, with some exceeding 300%. Combined, these states spent N98.71bn in Q1, up 51% from the previous quarter.

Experts raise red flags
Economists warn that rising debt obligations could crowd out spending on infrastructure and essential services. Teslim Shitta-Bey, Chief Economist at Proshare Nigeria, said many state governments have failed to manage their balance sheets effectively, relying too heavily on borrowing instead of exploring alternatives like long-term, equity-like financing.

He also urged states to compile a national asset register and make better use of revenue bonds to raise funds, rather than depending on general obligation bonds.

Similarly, NEITI noted that some highly indebted states also rank low in FAAC allocations, raising concerns about fiscal sustainability.

Macroeconomic analyst Dayo Adenubi advised states to boost IGR by raising consumption (to grow VAT collections) and enforcing property and transport levies, while ensuring improved service delivery to maintain taxpayer trust.