THIRTY-TWO states and the Federal Capital Territory accumulated nearly $1bn in fresh external loans in 2025, pushing subnational foreign debt sharply higher despite increased allocations from the Federation Account Allocation Committee (FAAC).
Data obtained from the Debt Management Office by News Point Nigeria showed that the combined external debt stock of Nigeria’s 36 states and the FCT rose from $4.80bn as of December 31, 2024, to $5.68bn by December 31, 2025.
The figures represent a net increase of $884.66m or 18.43 per cent year-on-year.
A breakdown of the data indicated that 33 out of the 37 subnational entities recorded increases in their external debt profiles during the review period, representing 89.19 per cent of the total, while only four states posted reductions.
The scale of the increase highlights continued reliance on foreign borrowing by state governments amid fiscal pressures, infrastructure demands and rising FAAC inflows.
Further analysis showed that total increases across the 32 states and the FCT amounted to $944.12m, while total debt reductions among the four states stood at $59.46m.
The net effect of both movements resulted in the overall increase of $884.66m in subnational external debt.
The figures indicate that the modest reductions recorded in a few states were insufficient to offset the aggressive borrowing trend across most states, with increases outweighing reductions by nearly 16 to 1.
The rise in debt comes despite a significant increase in FAAC disbursements to states, driven by rising oil prices, gains from naira devaluation and revenues unlocked by the removal of petrol subsidy.
However, the figures suggest that instead of using the increased inflows to reduce debt burdens, many states expanded their foreign borrowing.
Using the 2025 exchange rate adopted by the DMO at N1,435.2571/$1, the $944.12m increase in foreign loans translates to approximately N1.36tn in additional borrowing.
Among the few states that reduced their external debts were Edo State, Rivers State, Anambra State and Bayelsa State.
Edo recorded the largest reduction, with its foreign debt falling by $29.02m, representing a 7.58 per cent decline from $383.05m in 2024 to $354.03m in 2025.
Rivers followed with a decrease of $28.69m, or 14.37 per cent, dropping from $199.58m to $170.90m.
Anambra recorded a marginal reduction of $1.11m, while Bayelsa’s debt declined slightly by $0.64m.
Despite these reductions, the overwhelming trend among states remained upward.
Several states posted sharp increases in both absolute and percentage terms, reflecting aggressive borrowing patterns.
Katsina State recorded one of the highest increases in absolute terms, with its external debt rising by $100.16m, nearly doubling from $100.46m in 2024 to $200.62m in 2025.
Kaduna State also posted a major increase of $59.19m, bringing its total external debt stock to $684.29m, making it one of the most externally indebted states after Lagos State.
Kogi State recorded a $66.08m increase, representing a 126.07 per cent rise, while Niger State saw its external debt rise by $73.38m, more than doubling with a 109.18 per cent increase.
Plateau State recorded the highest percentage increase overall, with its debt surging by 187.24 per cent after rising by $60.24m.
Gombe State also posted one of the sharpest increases, with its debt rising by $55.67m from $33.00m to $88.66m, representing a 168.70 per cent jump.
Benue State recorded a 128.16 per cent increase, while Yobe State posted a 136.56 per cent surge.
Imo State saw its external debt rise by $45.64m, representing a 63.90 per cent increase, while Oyo State recorded a $34.71m increase, translating to a 65.73 per cent rise.
Sokoto State posted an increase of $42.92m or 84.15 per cent, while Jigawa State added $22.38m, representing a 95.87 per cent increase.
At the lower end, Lagos, which remains Nigeria’s 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 increase in Lagos’ debt profile suggests a more cautious borrowing approach compared to many other states despite retaining the largest debt stock.
Cross River State recorded a $20.46m increase to $222.92m, while Bauchi State posted a rise of $33.75m to $220.57m.
Ogun State increased its external debt by $24.10m, while Ondo State recorded an $8.25m rise.
In the South-East, Ebonyi State added $16.94m to its debt stock, while Enugu State recorded a $12.83m increase.
Abia State also posted a $5.69m increase, representing a modest 5.61 per cent rise.
Adamawa State recorded a $26.03m increase, while Akwa Ibom State saw its debt rise by $19.90m, representing a 55.97 per cent increase.
Delta State posted a $6.28m increase, while Ekiti State recorded a marginal rise of $1.73m.
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 sourced from multilateral institutions, with relatively limited exposure to bilateral and commercial lenders.
The sustained rise in subnational borrowing comes amid mounting fiscal pressures, rising recurrent expenditure and increasing infrastructure financing needs, despite improved FAAC revenues.
News Point Nigeria had earlier reported that FAAC allocations to states surged by more than N2tn in 2025, based on data published by the National Bureau of Statistics.
According to the data, state governments received a total of N7.315tn from FAAC in 2025 compared to N5.186tn in 2024.
The increase of approximately N2.13tn represented a 41 per cent rise in direct allocations.
When the constitutionally mandated 13 per cent derivation revenue is included, total inflows attributable to states rose to N8.934tn in 2025 from N6.533tn in 2024, reflecting an increase of N2.4tn or 36.74 per cent.
Overall FAAC distributions to the three tiers of government also rose from N15.259tn in 2024 to N21.897tn in 2025.
States accounted for a substantial share of the increase both in absolute terms and as a proportion of total federation revenue.
Without derivation revenue, states’ N7.315tn allocation represented about 33.4 per cent of total FAAC disbursements in 2025, compared to roughly 34 per cent in 2024.
When derivation revenue is included, total state-linked receipts of N8.934tn accounted for about 40.8 per cent of total FAAC distributions in 2025.
News Point Nigeria also reported that states paid N455.38bn in foreign debt servicing in 2025, up from N362.08bn in 2024, according to FAAC figures released by the National Bureau of Statistics.
The year-on-year increase showed that subnational governments’ foreign debt deductions rose by N93.30bn, representing a 25.77 per cent increase.
The development means states collectively lost a larger share of their FAAC inflows to debt repayments and related obligations in 2025, further squeezing fiscal space for salaries, capital projects and governance.
In a recent statement, the acting Director of Communication and Stakeholders Management at the Nigeria Extractive Industries Transparency Initiative, Obiageli Onuorah, warned that several states were facing financial pressure due to rising debt obligations despite record FAAC inflows.
According to the statement, a NEITI report showed that several states with high debt burdens ranked lower in FAAC allocations while recording higher debt deductions, raising concerns over fiscal sustainability.
“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 Politics Today on Channels Television, the Country Director of BudgiT, Vahyala Kwaga, expressed concern that increasing FAAC allocations appear to be discouraging states from improving their internally generated revenue.
“Fiscal sustainability requires that states look inward, improving revenue systems, cutting waste, and prioritising infrastructure and human development investments that deliver long-term value,” Kwaga said.