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🇳🇬 Nigeria /Economy & Trade

States, FCT external debt nears $1bn amid higher FAAC

From The Punch · (35m ago) English Critical tone

Summarized and contextualized by DistantNews.

TLDR

  • Thirty-two Nigerian states and the Federal Capital Territory accumulated nearly $1 billion in new external loans in 2025.
  • This increased the subnational foreign debt by 18.43% year-on-year, despite higher inflows from the Federation Account Allocation Committee (FAAC).
  • The trend indicates a continued reliance on foreign financing by states, even as FAAC disbursements have improved due to rising oil prices and subsidy removal.

An analysis of data from Nigeria's Debt Management Office reveals a significant surge in external borrowing by subnational governments. In 2025, 32 states and the Federal Capital Territory collectively took on nearly $1 billion in new foreign loans, pushing their combined external debt stock to $5.68 billion by the end of the year. This represents an 18.43% increase from the previous year, highlighting a persistent reliance on external financing despite improved domestic revenue streams.

The combined external debt stock of the 36 states and the FCT increased from $4.80bn as of December 31, 2024, to $5.68bn as of December 31, 2025, reflecting a net increase of $884.66m, or 18.43 per cent year-on-year.

— Analysis of DMO dataQuantifying the increase in subnational external debt in 2025.

The data indicates that a vast majority of states (33 out of 37) recorded increases in their external debt positions. This widespread borrowing expansion occurred even as FAAC disbursements to states saw considerable improvement, driven by factors such as higher oil prices, gains from naira devaluation, and revenue freed up from the removal of petrol subsidies. The figures suggest that rather than utilizing these enhanced inflows to reduce debt burdens, many states have opted to increase their borrowing from foreign sources.

This indicates that the modest declines recorded in a few states were insufficient to offset the widespread borrowing expansion across most states, with increases outweighing reductions by nearly 16 to 1.

— Analysis of DMO dataDescribing the overall trend of increasing external debt across states.

This trend raises concerns about fiscal sustainability at the subnational level. While some states like Edo, Rivers, Anambra, and Bayelsa managed to reduce their external debt, their decreases were dwarfed by the substantial increases elsewhere. Katsina and Kaduna, for instance, recorded significant jumps in their foreign debt. The continued appetite for external loans, even amidst rising domestic revenues, points to ongoing fiscal pressures, infrastructure demands, and potentially inefficient management of resources across many Nigerian states.

However, the figures suggest that rather than leveraging these inflows to reduce debt, some states are borrowing even more from foreign sources.

— Analysis of DMO dataCommenting on the states' response to improved FAAC disbursements.
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Originally published by The Punch. Summarized and contextualized by our editorial team with added local perspective. Read our editorial standards.

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