Foreign loan repayments by Nigeria’s 36 states increased sharply in 2025 with total deductions from Federation Accounts Allocation Committee (FAAC) inflows rising to N455.38 billion, according to official allocation data.
The figure represents a N93.30 billion increase compared to the N362.08 billion recorded in 2024, translating to a 25.77 percent year-on-year growth.
The development means a larger share of states’ statutory allocations was automatically applied to settling external debt obligations, reducing the cash available for recurrent spending and capital development.
Under the FAAC structure, external debt repayments are deducted at source as first-line charges, reducing the net allocation available to states. While this mechanism strengthens repayment credibility and protects Nigeria’s external obligations, it narrows fiscal headroom and increases budgetary strain when federation revenues fluctuate.
The 2025 monthly profile reveals a calibrated adjustment rather than erratic movement.
Deductions declined from N40.09 billion in January to N39.10 billion in February and remained unchanged through July, pointing to a stable external repayment schedule anchored on predetermined amortisation terms.
A second downward adjustment occurred in August, when total deductions declined to N36.14 billion. The reduced level remained unchanged for the rest of the year, indicating a recalibrated but steady repayment profile.
The 2024 pattern was more volatile. Deductions were significantly lower at the beginning of the year before rising sharply in the first quarter.
Following fluctuations in April, figures stabilised later in the year at higher monthly levels. Compared to that cycle, 2025 reflected greater predictability but a materially higher aggregate burden.
The concentration of repayments among a limited number of states remains notable. The top ten states accounted for roughly 68.57 percent of the total foreign debt service in 2025, highlighting a skewed distribution of external exposure.
Lagos State recorded the highest deductions at N92.80 billion, representing over one-fifth of the national total. Rivers State followed with N48.58 billion, marking one of the sharpest year-on-year increases among major borrowers. Kaduna State maintained a high repayment level at N47.93 billion.
Other states with significant deductions included Ogun State, Cross River State, Oyo State, and Edo State. Bauchi State, Kano State, and Ebonyi State completed the leading group, with several recording double-digit percentage increases.
From a regional standpoint, the South-West accounted for the largest share of deductions in 2025, driven primarily by Lagos and supported by sizeable repayments from Ogun, Oyo, Ondo, Ekiti, and Osun.
The South-South followed, reflecting high obligations in Rivers, Edo, Cross River, Delta, Akwa Ibom, and Bayelsa. The North-West ranked third, influenced largely by Kaduna and Kano.
Other zones, including the North-East, South-East, and North-Central, posted lower aggregate totals but still recorded substantial annual deductions relative to their revenue bases.
The rising foreign debt service obligations come amid broader discussions on subnational fiscal sustainability.
Analysts note that while access to external financing can support infrastructure expansion, repayment commitments must be aligned with revenue growth to avoid long-term strain.
With external debt repayments now consuming a larger portion of shared revenue, states may face tighter budget conditions in the coming fiscal cycle.
The trajectory of FAAC inflows, exchange rate stability, and debt management strategies will remain central to subnational fiscal health in 2026.
