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Foreign debt service Nigeria rises sharply as states pay over N455bn in 2025, reducing funds available for projects and salaries.

Nigerian states spent a total of N455.38 billion servicing foreign debt in 2025, according to new data from the Federation Accounts Allocation Committee (FAAC).

The figure represents an increase of N93.30 billion compared with the N362.08 billion recorded in 2024, marking a year-on-year rise of about 25.8 per cent.

The increase means a larger share of funds distributed through FAAC was used to settle external loan obligations. This leaves less money available for salaries, infrastructure, and day-to-day government operations.

Debt service deductions in 2025 followed a largely stable trend.

In January, states paid N40.09 billion, before the amount eased slightly to N39.10 billion in February. From March to July, deductions remained unchanged at N39.10 billion each month.

Payments dropped further in August to N36.14 billion and stayed at that level through the end of the year.

This pattern contrasts with 2024, when monthly deductions fluctuated more sharply. Payments began at N9.88 billion in January, climbed to N24.53 billion in February, and peaked at N40.41 billion in March before falling again in April. Another increase in August saw deductions stabilise at about N40.09 billion for the rest of that year.

Foreign debt service is deducted directly from states’ FAAC allocations before funds are released.

While this system ensures creditors are paid on time, it reduces the cash available to states, especially when federation revenues are under pressure.

The data also shows that foreign debt repayments were concentrated among a limited number of states. The top ten accounted for more than two-thirds of the total deductions in 2025.

Lagos recorded the highest payment at N92.80 billion, rising from N72.32 billion in 2024.

Rivers followed with N48.58 billion, more than double its previous year’s figure of N23.13 billion.

Kaduna paid N47.93 billion, while Ogun’s deductions rose sharply to N25.20 billion from N11.99 billion the year before.

Other states in the top group include Cross River, Oyo, Edo, Bauchi, Kano and Ebonyi, each recording notable increases compared with 2024.

Analysts say rising debt service costs continue to put pressure on state budgets. With more funds committed to loan repayments, governments may face tighter spending choices in areas such as infrastructure, social services and public sector wages.

The trend also highlights the growing importance of prudent borrowing and revenue generation at the state level as external obligations continue to weigh on public finances.