Nigerian States Face 68% Surge in Foreign Debt Payments

Nigerian States Face 68% Surge in Foreign Debt Payments

Nigerian states have seen a significant 68.4% increase in foreign debt payments, rising to N235.58 billion in the first half of 2025 from N139.92 billion in the same period of 2024. This surge is largely attributed to the depreciation of the naira, which has inflated the cost of dollar-denominated debt repayments.

Top States with Highest External Debt Service Payments:
Lagos State:N49.58 billion, a 52.8% increase from N32.44 billion in 2024
Rivers State: N26.34 billion, a 470% increase from N4.62 billion in 2024

Kaduna State:N24.47 billion, a 6% increase from N23.09 billion in 2024
Ogun State: N12.57 billion, nearly triple the N4.29 billion recorded in the first half of 2024
Edo State:N10.18 billion, a 72.6% increase from N5.90 billion in 2024

States with Lowest External Debt Service Payments:
Jigawa State:N1.39 billion, a 54.3% increase from N900.54 million in 2024

Benue State : N1.44 billion, up 62.1% from N890.16 million in 2024
Yobe State:N1.46 billion, representing a 77% rise from N823.59 million in 2024.

The Federal Government manages external debt servicing for states through an Irrevocable Standing Payment Order arrangement, deducting agreed debt service amounts from monthly FAAC allocations. Economists warn that rising debt burdens threaten fiscal stability, and many states now spend a disproportionate share of their internally generated revenue (IGR) on debt .

To mitigate this, experts suggest improving tax collection and internal revenue generation as critical steps for states amidst rising debt service obligations and reduced federal transfers. The Nigeria Extractive Industries Transparency Initiative has also raised concerns about states with low FAAC allocations but high debt service burdens, which could impact fiscal sustainability .