Nigerian state governments spent a total of ₦455.38 billion in 2025 on servicing foreign loans, according to figures analysed from the Federation Accounts Allocation Committee (FAAC) by The PUNCH. This marked a 25.8 per cent increase compared with ₦362.08 billion in 2024, highlighting the growing burden of external debt on subnational finances.
The deductions are made directly from states’ monthly FAAC allocations, ensuring that foreign creditors are paid promptly. While this protects Nigeria’s creditworthiness, it reduces the funds available for salaries, infrastructure, health, and education, increasing pressure on state budgets.
A month-to-month review shows that states spent between ₦36 billion and ₦40 billion per month on foreign debt repayments in 2025, with slight variations depending on the timing of specific loan obligations.
Lagos State led the list, accounting for ₦92.8 billion, roughly 20.4 per cent of the national total. Other states with high foreign loan servicing costs included:
- Rivers State – ₦48.58 billion
- Kaduna State – ₦47.93 billion
- Ogun State – ₦25.2 billion
- Cross River State – ₦21.01 billion
Economists warn that the growing share of revenue devoted to external debt payments is crowding out essential services and capital projects, particularly for states heavily reliant on FAAC distributions. The situation underscores the need for better debt management and fiscal planning at the state level, as Nigeria’s subnational debt continues to rise.
The trend reflects broader concerns about debt sustainability for Nigerian states, many of which have taken foreign loans to finance development projects and fill budget gaps amid fluctuating internally generated revenue. Analysts argue that without careful management, foreign debt servicing could continue to constrain development priorities across the country.
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