20 Governors Borrow ₦458bn Despite Rising Debt Burden

No fewer than 20 state governments borrowed about ₦458bn in the first half of 2025 despite receiving significantly higher allocations from the Federation Account, fresh findings have revealed.

Data reviewed by Saturday PUNCH shows that the states collectively spent about ₦235.58bn on servicing external debt during the period, a sharp rise of ₦95.65bn, or 68.4 per cent, compared to the ₦139.92bn spent in the first half of 2024. Analysts say this surge highlights the mounting pressure of dollar-denominated debt repayments on already strained state finances amid the persistent depreciation of the naira.

According to the latest disbursement data from the National Bureau of Statistics (NBS), the Federation Account Allocation Committee (FAAC) shared ₦10.13tn, comprising statutory revenue, VAT, Electronic Money Transfer Levy, and exchange rate difference, among the three tiers of government between January and June 2025. Of this, states received ₦3.425tn, representing a 42.96 per cent increase from the ₦2.396tn received during the same period in 2024.

Monthly allocations to states surged this year, rising to ₦590.6bn in January, ₦562.19bn in February, and ₦607bn in June, compared to monthly figures ranging between ₦366bn and ₦461bn in H1 2024.

Surge in Borrowings Despite Rising Revenues

Despite the higher inflows, about 20 states still resorted to fresh borrowings — both foreign and domestic, totalling ₦457.66bn in the first half of 2025.

Leading the pack is Oyo State, which secured a ₦93.4bn domestic loan. Kaduna and Lagos followed with ₦62bn (foreign) and ₦50bn (domestic) loans respectively. Other states that took foreign loans include Gombe (₦20.3bn), Zamfara (₦28bn), Katsina (₦20.7bn), Kebbi (₦7.4bn), and Jigawa (₦10.98bn).

Bauchi took both domestic and foreign loans totalling ₦26.3bn, while Borno, Taraba, Sokoto, Niger, Kwara, and Ekiti borrowed ₦18.2bn, ₦18.7bn, ₦15bn, ₦25.8bn, ₦2.18bn, and ₦19.8bn respectively in foreign loans. Ondo (₦5.6bn), Abia (₦7bn), Ebonyi (₦10.9bn), and Enugu (₦10.7bn) also featured on the foreign borrowing list.

Analysts Warn of Fiscal Risks

Economists have warned that the continued reliance on external loans could worsen fiscal vulnerabilities for states. Professor Taiwo Owoeye of Ekiti State University noted that the weakening naira automatically inflates repayment obligations on dollar-denominated debts, forcing states to commit a larger share of their monthly FAAC allocations to debt servicing.

“Every depreciation of the naira means states must find more naira to meet their repayment schedules, leaving fewer funds for health, education, infrastructure, and other critical development projects,” Owoeye explained.

He added that heavy dependence on foreign loans also undermines states’ financial autonomy. “Many states risk mortgaging their future federal allocations, which limits their ability to respond to emergencies or fund long-term development initiatives,” he warned.

Observers say the rising debt profile of states, if left unchecked, could deepen fiscal crises across the federation, particularly as interest rates climb and foreign exchange volatility persists.