States, FCT External Debt Hits $5.7bn Despite Higher FAAC

Subnational external debt rose sharply in 2025, with 32 states and the Federal Capital Territory (FCT) accumulating nearly $5.7bn, despite higher inflows from the Federation Account Allocation Committee (FAAC).

Data from the Debt Management Office (DMO) showed that combined state and FCT debt climbed from $4.80bn in 2024 to $5.68bn in 2025, a net increase of $884.66m (18.43%).

Out of 37 entities, 33 recorded increases in external debt, while only four—Edo, Rivers, Anambra, and Bayelsa—posted declines.

Edo saw the largest reduction, dropping by $29.02m (7.58%), while Rivers fell by $28.69m (14.37%).

In contrast, several states recorded aggressive borrowing. Katsina’s debt nearly doubled to $200.62m, while Kogi (+126%), Niger (+109%), Plateau (+187%), and Gombe (+169%) posted some of the steepest percentage increases.

Lagos, already the most indebted state externally, showed only a marginal rise of $4.83m (0.41%), suggesting a more cautious approach despite its large debt stock of over $1.17bn.

The rise in borrowing comes even as FAAC allocations surged. States received ₦7.315tn in 2025, up 41% from 2024, and with derivation revenue included, total inflows reached ₦8.934tn. Yet, states still paid ₦455.38bn in foreign debt service, up 25.77% from 2024.

Analysts warn that reliance on dollar-denominated loans exposes states to currency risks, with every naira depreciation inflating repayment costs.

“By taking on more foreign obligations, many states risk mortgaging future federal allocations,” said Prof. Taiwo Owoeye.

Experts like Teslim Shitta-Bey and Dayo Adenubi argue that states must boost internally generated revenue, cut waste, and adopt more sustainable financing models, rather than depending on external loans despite record-high FAAC inflows.