Thirty-two states and the Federal Capital Territory’s debt rose to nearly $5.7bn in fresh external loans in 2025, driving a year-on-year surge in subnational foreign debt despite higher inflows from Federation Account Allocation Committee disbursements, according to The PUNCH analysis.
Data from the Debt Management Office indicated that 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.
A breakdown of the data showed that 33 out of the 37 subnational entities recorded increases in their external debt positions during the period under review, representing 89.19 per cent of the total, while only four states posted declines, accounting for 10.81 per cent.
The scale of the increase shows a continued reliance on external financing by state governments amid fiscal pressures, infrastructure demands, and rising FAAC revenues.
Analysis of year-on-year movements revealed that total increases across the 32 states and the FCT amounted to $944.12m, while total reductions across the four states amounted to $59.46m. The net effect of these opposing movements resulted in the overall increase of $884.66m in the external debt stock.
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.
The rise in indebtedness comes at a time when FAAC disbursements to states have improved considerably, fuelled by rising oil prices, gains from naira devaluation, and revenue freed up from petrol subsidy removal.
However, the figures suggest that rather than leveraging these inflows to reduce debt, some states are borrowing even more from foreign sources. The 32 states and FCT, which recorded a $944.12m increase in foreign loans, got about N1.36tn in naira terms using the exchange rate adopted by the DMO for 2025, which is N1,435.2571/$1.
Among the states that recorded declines were Edo, Rivers, Anambra, and Bayelsa. Edo posted the largest reduction, with its external debt falling by $29.02m, representing a 7.58 per cent decrease from $383.05m in 2024 to $354.03m in 2025.
Rivers followed with a decline of $28.69m, or 14.37 per cent, dropping from $199.58m to $170.90m. Anambra recorded a marginal decrease of $1.11m, while Bayelsa’s debt reduced slightly by $0.64m.
Despite these reductions, the overwhelming trend across states was upward. Several states recorded significant increases in both absolute and percentage terms, indicating aggressive borrowing patterns.
Katsina recorded one of the largest increases in absolute terms, with its external debt rising by $100.16m, nearly doubling from $100.46m in 2024 to $200.62m in 2025, representing a 99.70 per cent increase.
Kaduna also posted a substantial increase of $59.19m, bringing its total external debt to $684.29m, making it one of the most indebted states externally after Lagos.
Kogi’s external debt rose by $66.08m, representing a 126.07 per cent increase, while Niger recorded a $73.38m rise, more than doubling its debt stock with a 109.18 per cent increase. Plateau recorded the highest percentage increase overall at 187.24 per cent, with its debt rising by $60.24m.
Gombe posted one of the highest percentage increases at 168.70 per cent, with its external debt jumping by $55.67m from $33.00m to $88.66m. Benue also recorded a sharp increase of 128.16 per cent, while Yobe’s debt surged by 136.56 per cent, further highlighting the rapid pace of borrowing among several states.
Imo’s external debt rose by $45.64m, representing a 63.90 per cent increase, while Oyo recorded a $34.71m rise, translating to a 65.73 per cent increase. Sokoto’s debt increased by $42.92m, or 84.15 per cent, while Jigawa posted a 95.87 per cent increase, adding $22.38m to its debt stock.
At the lower end of the spectrum, Lagos, which remains the most externally indebted state, recorded only a marginal increase of $4.83m, representing 0.41 per cent growth from $1.17bn in 2024 to $1.17bn in 2025.
The relatively flat growth in Lagos’ external debt suggests a more cautious borrowing approach compared to other states, despite maintaining the largest debt stock.
Cross River’s debt rose by $20.46m to $222.92m, while Bauchi recorded an increase of $33.75m to $220.57m. Ogun’s external debt rose by $24.10m, while Ondo recorded an $8.25m increase.
In the South-East, Ebonyi’s debt rose by $16.94m, while Enugu recorded a $12.83m increase. Abia’s external debt also rose by $5.69m, representing a modest 5.61 per cent increase.
Adamawa posted a $26.03m increase, while Akwa Ibom’s debt rose by $19.90m, representing a 55.97 per cent increase. Delta recorded a $6.28m increase, while Ekiti saw a marginal rise of $1.73m, indicating relatively moderate borrowing activity in those states. The FCT also recorded an increase of $7.31m, representing a 37.53 per cent rise from $19.48m in 2024 to $26.80m in 2025.
