States hit by 68% spike in foreign debt payments
States collectively spent about N235.58bn on servicing external debt obligations in the first half of 2025, The PUNCH reports. This is according to an analysis of the data from the Federal Account Allocation Committee disbursement released by the National Bureau of Statistics.
The amount represents a sharp increase of N95.65bn or 68.4 per cent when compared with the N139.92bn recorded in the corresponding period of 2024, showing the mounting pressure of dollar-denominated debt repayments on state finances in the wake of the naira’s depreciation.
It is crucial to note that the Federal Government undertakes external debt servicing on behalf of the states through an Irrevocable Standing Payment Order arrangement, which authorises automatic deductions from their monthly FAAC allocations.
Under this process, once an external loan has been approved and a subsidiary agreement executed, the Office of the Accountant-General of the Federation, working with the Federal Ministry of Finance and the Central Bank of Nigeria, deducts the agreed debt service amount before releasing allocations to the states.
According to an analysis of data done by The PUNCH, January 2025 began with a hefty outflow of N40.09bn towards external debt servicing, a sum that dwarfs the N9.88bn paid in the same month of 2024. This represented a year-on-year jump of more than 305 per cent and was the highest single-month repayment in the first half of the year.
In February, the states collectively paid N39.10bn, a figure which, although slightly lower than January’s, was still markedly higher than the N24.53bn disbursed in February 2024, representing a 59.5 per cent increase.
March 2025 recorded the same N39.10bn, marginally lower than the N40.41bn paid in March 2024, reflecting the unusual spike that occurred in that month last year when some states made large payments to clear maturing obligations.
