At least 20 state governments across Nigeria borrowed a combined N458bn in the first half of 2025, even as their debt servicing costs continued to soar.

Within the period, the states spent about N235.58bn on external debt servicing—an increase of N95.65bn or 68.4 per cent compared to the N139.92bn spent in the same period of 2024. Experts have linked this surge to the growing pressure of dollar-denominated repayments triggered by the persistent depreciation of the naira.

Data from the National Bureau of Statistics, based on Federal Account Allocation Committee disbursements, revealed that a total of N10.13 trillion was shared among the federal, state, and local governments between January and June 2025. This included statutory revenue, Value Added Tax, Electronic Money Transfer Levy, and exchange rate adjustments.

Of this sum, the states collectively received N3.425tn, marking a 42.96 per cent rise from the N2.396tn allocated in the first half of 2024.

Breakdown of allocations showed that in 2024, the states received N379bn in January, N366.9bn in February, N396.8bn in March, N403bn in April, N388.4bn in May, and N461.97bn in June. In contrast, 2025 allocations surged significantly, with N590.6bn in January, N562.19bn in February, N530.45bn in March, N556.74bn in April, N577.84bn in May, and N607bn in June.

Despite these higher inflows, budget implementation reports indicated that about 20 states turned to fresh borrowing—both domestic and foreign—amounting to N457.66bn in the first six months of 2025.

Oyo State topped the list with a N93.4bn domestic loan, followed by Kaduna, which obtained N62bn in foreign loans, and Lagos with N50bn in domestic borrowing.

Other states with foreign loans include Gombe (N20.3bn), Zamfara (N28bn), Katsina (N20.7bn), Kebbi (N7.4bn), and Jigawa (N10.98bn). Bauchi borrowed both domestic and foreign loans totaling N26.3bn, while Borno, Taraba, Sokoto, Niger, Kwara, and Ekiti took N18.2bn, N18.7bn, N15bn, N25.8bn, N2.18bn, and N19.8bn respectively.

Ondo (N5.6bn), Abia (N7bn), Ebonyi (N10.9bn), and Enugu (N10.7bn) also accessed foreign loans during the period.

Analysts caution that this growing dependence on foreign borrowing exposes states to significant fiscal risks amid the weakening naira.

“Since most debts are dollar-denominated, every depreciation of the local currency automatically inflates repayment costs, forcing states to divert a larger portion of their revenues to debt servicing at the expense of development projects,” said Professor Taiwo Owoeye, an economist at Ekiti State University.

Owoeye further warned that beyond the rising repayment burden, the trend threatens states’ financial independence.

“By taking on more foreign obligations, many states risk tying down future federal allocations to meet repayment schedules, leaving little room to address emergencies or invest in key sectors such as health, education, and infrastructure,” he added.