At least 20 states within the federation incurred around N458 billion in debt during the first half of 2025, according to our data.
This occurs amid a rising external debt servicing load affecting state governments, according to Saturday PUNCH.
The states collectively expended around N235.58 billion on servicing external debt during the period, reflecting a significant increase of N95.65 billion or 68.4 percent compared to the N139.92 billion reported in the same half of 2024.
Experts indicate that the increase highlights the escalating burden of dollar-denominated debt repayments on state budgets following the naira’s depreciation.
An examination of the Federal Account Allocation Committee disbursement data published by the National Bureau of Statistics indicates that a total of N10.13 trillion, encompassing statutory revenue, Value Added Tax, Electronic Money Transfer Levy, and Exchange Rate Difference, was distributed among the three tiers of government in the first half of this year.
The states received N3.425 trillion, reflecting a 42.96 percent increase from the N2.396 trillion received in the first half of 2024.
In the first half of 2024, the states received N379 billion in January, N366.9 billion in February, N396.8 billion in March, N403 billion in April, N388.4 billion in May, and N461.97 billion in June.
During the same period this year, allocations increased to N590.6 billion in January, N562.19 billion in February, N530.45 billion in March, N556.74 billion in April, N577.84 billion in May, and N607 billion in June.
Notwithstanding the increased inflows, an examination of states’ Q2 budget implementation reports revealed that about 20 states continued to engage in new borrowings, both foreign and domestic, totaling N457.66 billion in the first half of 2025.
Oyo State is at the forefront, having secured a N93.4 billion domestic loan, followed by Kaduna with an N62 billion foreign loan and Lagos with a N50 billion domestic loan.
States that acquired foreign loans comprise Gombe (N20.3 billion), Zamfara (N28 billion), Katsina (N20.7 billion), Kebbi (N7.4 billion), and Jigawa (N10.98 billion).
Bauchi acquired both domestic and international loans amounting to N26.3 billion, whereas Borno, Taraba, Sokoto, Niger, Kwara, and Ekiti secured foreign loans of N18.2 billion, N18.7 billion, N15 billion, N25.8 billion, N2.18 billion, and N19.8 billion, respectively.
The foreign loan roster additionally comprises Ondo (N5.6 billion), Abia (N7 billion), Ebonyi (N10.9 billion), and Enugu (N10.7 billion).
Analysts caution that ongoing dependence on foreign loans increases budgetary vulnerabilities for governments amid a depreciating naira.
“Given that the majority of debts are denominated in dollars, any depreciation of the local currency inherently increases repayment obligations, compelling states to allocate a greater portion of their revenues towards debt servicing, thereby detracting from development projects,” states Taiwo Owoeye, a Professor of Economics at Ekiti State University.
In addition to repayment expenses, Owoeye observed that substantial external borrowing compromises states’ financial independence.
“By assuming additional foreign obligations, numerous states jeopardize future federal allocations required for repayment, thereby limiting their capacity to address emergencies or finance essential sectors such as health, education, and infrastructure,” he elucidated.
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