States' Foreign Debt Service Soars to N455 Billion in 2025, New FAAC Data Reveals
Newly released data from the Federation Accounts Allocation Committee (FAAC) has exposed a significant financial strain on Nigerian states, with foreign debt service payments reaching N455.38 billion in 2025. This marks a sharp increase from the N362.08 billion recorded in 2024, representing a year-on-year rise of N93.30 billion, or 25.77 per cent.
The substantial growth in debt servicing indicates that states are allocating a larger portion of their FAAC distributions to meet external loan obligations. This trend leaves diminished fiscal space for critical expenditures such as salary payments, capital projects, and routine governance functions, potentially hampering development and public service delivery across the nation.
Monthly Trends Show Step-Wise Pattern in 2025
An analysis of monthly data for 2025 reveals a step-wise pattern in foreign debt service deductions rather than a smooth curve. Total deductions across all 36 states stood at N40.09 billion in January, easing slightly to N39.10 billion in February, a drop of N994.96 million or 2.48 per cent.
From March through July, deductions remained steady at N39.10 billion monthly. A further reduction occurred in August, when deductions fell to N36.14 billion, representing a 7.56 per cent decline from July. This lower level persisted through December, indicating a consistent but elevated burden throughout the year.
Contrast with 2024's Sharper Fluctuations
In contrast, 2024 exhibited more volatile monthly fluctuations. Deductions began at N9.88 billion in January, jumped to N24.53 billion in February, and peaked at N40.41 billion in March. They then dropped to N21.70 billion in April and held steady through July.
A second increase occurred in August 2024, stabilizing at N40.09 billion for the remainder of the year. This comparison highlights how 2025 maintained a higher baseline of debt service, with less dramatic swings but overall greater financial pressure.
How Foreign Debt Service Works in FAAC
Foreign debt service in the FAAC framework reflects deductions made at source from state allocations to cover external loan obligations. While this system protects creditors by ensuring timely repayments, it significantly limits the discretionary cash available to states. This constraint is particularly acute during months of constrained federation revenue, forcing states to prioritize debt over other needs.
Top 10 States Account for Majority of Debt Service
A closer examination of the data shows a concentration of foreign debt service among a few states. The top 10 states accounted for 68.57 per cent of the total in 2025, underscoring regional disparities in financial burdens.
- Lagos led with N92.80 billion, up from N72.32 billion in 2024, a 28.33 per cent increase.
- Rivers followed with N48.58 billion, more than doubling from N23.13 billion in 2024, a staggering 110.02 per cent rise.
- Kaduna recorded N47.93 billion, up N2.34 billion or 5.13 per cent from the previous year.
- Ogun saw its deductions more than double to N25.20 billion from N11.99 billion, a 110.22 per cent increase.
- Cross River paid N21.01 billion, up 22.86 per cent from N17.10 billion.
- Oyo dedicated N20.17 billion, a 12.98 per cent increase from N17.85 billion.
- Edo allocated N18.70 billion, up 11.78 per cent from N16.73 billion.
- Bauchi spent N16.85 billion, a 22.58 per cent rise from N13.75 billion.
- Kano paid N10.63 billion, up 24.67 per cent from N8.53 billion.
- Ebonyi recorded N10.37 billion, a significant 53.09 per cent increase from N6.77 billion.
The escalating debt service payments highlight growing financial vulnerabilities for Nigerian states, raising concerns about sustainable fiscal management and the ability to fund essential public services amid rising external obligations.
