States FCT external debt
The States FCT external debt profile has climbed sharply, raising fresh concerns over the borrowing appetite of subnational governments despite improved revenue inflows from the Federation Account Allocation Committee.
According to data from the Debt Management Office, the combined external debt stock of the 36 states and the Federal Capital Territory rose from $4.80bn as of December 31, 2024, to $5.68bn as of December 31, 2025. This represents a net increase of $884.66m, or 18.43 per cent year-on-year.
The latest figures show that the States FCT external debt burden did not merely rise in isolated cases. Out of 37 subnational entities, 33 recorded increases, while only four states posted declines. Total increases across 32 states and the FCT reached $944.12m, while reductions by four states stood at only $59.46m.
This means that while the headline figure is often presented as “near $1bn,” the more accurate reading is that states and the FCT added nearly $1bn in fresh external debt, pushing total subnational foreign debt close to $5.7bn.
The rise in States FCT external debt comes despite stronger FAAC inflows. State governments reportedly received N7.315tn from FAAC in 2025, compared with N5.186tn in 2024, an increase of about N2.13tn, or roughly 41 per cent. When 13 per cent derivation is included, state-linked receipts rose to N8.934tn in 2025 from N6.533tn in 2024.
This is the real concern. Higher FAAC should ordinarily give states more room to reduce debt pressure, pay contractors, improve basic services and strengthen internally generated revenue systems. Instead, the States FCT external debt trend suggests that many state governments are still leaning heavily on foreign loans.
Lagos remains the most externally indebted state, although its increase was marginal. Its external debt rose by only $4.83m, from about $1.17bn in 2024 to $1.17bn in 2025, representing just 0.41 per cent growth. Kaduna also remains heavily exposed, with its debt rising by $59.19m to $684.29m.
Several states recorded sharper jumps. Katsina’s external debt rose by $100.16m, almost doubling from $100.46m to $200.62m. Kogi’s debt rose by $66.08m, Niger added $73.38m, while Plateau recorded the highest percentage increase at 187.24 per cent after adding $60.24m.
The States FCT external debt story also shows that the pressure is spread across regions. Gombe’s external debt jumped by 168.70 per cent, Benue rose by 128.16 per cent, Yobe by 136.56 per cent, Sokoto by 84.15 per cent, Jigawa by 95.87 per cent, and Oyo by 65.73 per cent.
https://ogelenews.ng/states-fct-external-debt-hits-5-68bn-despite-higher…
Only Edo, Rivers, Anambra and Bayelsa recorded declines. Edo posted the largest reduction, cutting its external debt by $29.02m, while Rivers reduced its debt by $28.69m. Anambra and Bayelsa recorded smaller reductions of $1.11m and $0.64m respectively.
For ordinary Nigerians, these numbers matter because external debt is not just a balance-sheet item. It affects future budgets, debt servicing deductions, project financing and the ability of state governments to fund education, healthcare, roads and salaries without fresh pressure.
The stronger FAAC environment makes the issue more serious. In the first quarter of 2026, states received N2.10tn from all FAAC revenue streams, compared with N1.69tn in Q1 2025, an increase of N416.79bn, or 24.72 per cent.
Yet, the growth in States FCT external debt suggests that higher revenue has not translated into stronger fiscal restraint. It raises a familiar question: are states borrowing for productive infrastructure that can generate economic returns, or are they borrowing to cover weak revenue systems and rising recurrent expenditure?
This distinction is important. External loans are not automatically bad. If properly used for power, roads, water systems, agriculture, industrial zones and transport infrastructure, they can help expand state economies. But when borrowing is not tied to measurable development outcomes, it becomes a burden passed to future administrations and citizens.
The DMO data also shows that the bulk of the loans are multilateral, with limited exposure to bilateral and commercial sources. That may reduce immediate interest pressure, but it does not remove exchange-rate risk. Since external loans are denominated in foreign currency, any further weakening of the naira increases the domestic cost of repayment.
The States FCT external debt rise should therefore prompt stronger legislative oversight at the state level. Houses of Assembly must do more than approve loan requests. They should demand project details, repayment plans, procurement transparency and evidence that loans are tied to projects with public value.
There is also a need for citizens and civil society to follow state borrowing more closely. Many Nigerians focus only on federal debt, but subnational debt affects daily life directly. A state struggling with debt repayments may delay salaries, abandon capital projects, raise taxes or reduce social spending.
In the final analysis, the States FCT external debt increase is a warning signal. States are receiving more money from FAAC, but many are still borrowing more from external sources. That combination may be defensible where loans are productive and transparent. But without strict accountability, it risks becoming another cycle of higher revenue, higher debt and limited development.
The issue is no longer whether states can borrow. The real question is whether they are borrowing wisely, transparently and in the long-term interest of citizens.
https://punchng.com/states-fct-external-debt-nears-1bn-amid-higher-faac
