At least 20 states borrowed a combined N458bn in the first half of 2025, even though federal allocations to them rose sharply. Data shows that states also spent N235.6bn on servicing foreign loans within the same period, a 68% jump from last year.
The pressure comes from the rising cost of repaying dollar loans as the naira continues to weaken. Analysts warn that this trend is draining state resources, leaving little money for vital projects in health, education, and infrastructure.
Despite receiving N3.42tn from the federation account between January and June a 43% increase from the N2.39tn they got last year states still turned to fresh borrowing. Oyo state led the pack with a N93.4bn domestic loan, followed by Kaduna state (N62bn, foreign) and Lagos state (N50bn, domestic).
Other borrowers include Zamfara (N28bn), Katsina (N20.7bn), Bauchi (N26.3bn), Borno (N18.2bn), Taraba (N18.7bn), and several others, with some states combining both foreign and domestic debts.
Experts caution that states are increasingly mortgaging their future allocations to service debts. “Every depreciation of the naira inflates repayment costs, forcing states to cut back on development,” says Prof. Taiwo Owoeye of Ekiti State University.