At least 20 state governments borrowed about ₦458 billion in the first half of 2025, even as their debt servicing costs continue to rise.
Findings show that the states collectively spent ₦235.58 billion on servicing external debts within the same period. This marks an increase of 68.4 per cent compared to the ₦139.92 billion spent in the first half of 2024.
Experts say the rise is due to the weakening naira, which has made it more expensive to repay dollar loans.
Professor of Economics at Ekiti State University, Taiwo Owoeye, warned that continued reliance on foreign borrowing could endanger state finances.
“Since most of the debts are dollar-denominated, every depreciation of the local currency automatically inflates repayment obligations, forcing states to channel a larger share of their revenues into debt servicing at the expense of development projects,” he said.
Despite receiving higher allocations from the federal government, many states still turned to loans. Data from the National Bureau of Statistics shows that the states got ₦3.425 trillion from the Federation Account in the first half of 2025, up by 42.96 per cent from ₦2.396 trillion in the same period of 2024.
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Leading the list of borrowers is Oyo State, which took a ₦93.4bn domestic loan. Kaduna State borrowed ₦62bn (foreign), while Lagos State collected ₦50bn (domestic).
Other states that took foreign loans include Gombe (₦20.3bn), Zamfara (₦28bn), Katsina (₦20.7bn), Kebbi (₦7.4bn), Jigawa (₦10.98bn), Ondo (₦5.6bn), Abia (₦7bn), Ebonyi (₦10.9bn), and Enugu (₦10.7bn).
Bauchi State borrowed both foreign and domestic loans totalling ₦26.3bn, while Borno, Taraba, Sokoto, Niger, Kwara, and Ekiti also borrowed significant amounts.
Professor Owoeye further cautioned that external debts reduce states’ financial independence.
“By taking on more foreign obligations, many states risk mortgaging future federal allocations to meet repayment schedules, leaving them with little room to respond to emergencies or fund critical sectors such as health, education, and infrastructure,” he explained.