States Spent N455bn Servicing Foreign Loans in 2025, FAAC Data Reveals
State governments across Nigeria spent a combined N455 billion servicing foreign loans in 2025, according to newly released data from the Federation Account Allocation Committee (FAAC).
The figures, which form part of FAAC’s fiscal transparency updates, reveal the scale of debt obligations borne by subnational governments amid ongoing economic pressures and exchange rate fluctuations. The N455 billion represents payments made toward external debt servicing, including principal repayments and interest obligations tied to foreign-denominated loans.
Analysts note that the burden of servicing foreign loans has been amplified by currency volatility. With many external loans denominated in U.S. dollars and other foreign currencies, the depreciation of the naira has significantly increased repayment costs when converted to local currency.
The FAAC data underscores the fiscal strain facing state governments, many of which depend heavily on monthly allocations from the federation account to fund recurrent expenditure and capital projects. Observers say rising debt servicing obligations may limit the capacity of states to invest in infrastructure, healthcare, education, and social programs.
Financial experts have emphasized the need for prudent borrowing and stronger internally generated revenue (IGR) frameworks to reduce reliance on external loans. They also recommend improved fiscal discipline and transparency to ensure borrowed funds are channeled toward productive investments capable of generating long-term economic returns.
Despite the substantial outlay on foreign debt servicing, some economists argue that external borrowing can still be beneficial if funds are used for growth-enhancing projects such as power generation, transportation networks, and industrial development. However, they caution that weak project execution and revenue shortfalls can turn debt into a long-term fiscal challenge.
The new FAAC figures come amid broader national conversations about Nigeria’s overall public debt profile, which includes federal and state obligations. Stakeholders have called for a balanced approach that combines responsible borrowing with structural reforms aimed at boosting economic productivity and revenue diversification.
State officials have not yet issued individual breakdowns detailing which states accounted for the largest share of the N455 billion payment. However, fiscal analysts expect debt-heavy states to feel the impact more acutely, particularly those with limited revenue bases.
As Nigeria continues to navigate economic reforms and currency adjustments, debt sustainability remains a key policy concern at both federal and state levels.
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