The total domestic debt of all 36 states of the federation and the Federal Capital Territory (FCT) rose from N3.87 trillion in the first quarter of 2025 to N3.96 trillion in the second quarter.
According to data from the Debt Management Office (DMO), this shows a difference of N94.79 billion, or 2.45 per cent. However, in comparison with the corresponding quarter in 2024, the states’ total domestic debt dropped by 7.1 per cent from N4.27 trillion.
Analysis of sub-national domestic debt profiles since the inception of this administration in 2023 shows more of a declining trend, attributed to the significant increase in revenue accruing to the states from the federation account, largely as a result of the removal of the fuel subsidy.
The debt dropped from N5.82 trillion as at 30 June 2023 to N5.74 trillion in the third quarter of 2023; it, however, rose slightly to N5.86 trillion in the fourth quarter of 2023 before dropping to N4.07 trillion in the first quarter of 2024.
In the second quarter of 2024, it rose to N4.27 trillion, dropped to N4.21 trillion in the third quarter, and further declined to N3.97 trillion in the fourth quarter of 2024.
In the first quarter of 2025, it continued the downward trend, dropping to N3.87 trillion. The rise of the debt profile in the second quarter of 2025 was driven by the significant rise in the debts of Lagos, Cross River, and Taraba states. Each of the states’ debt profiles rose by N167.31 billion, N32.16 billion, and N11 billion,
respectively, over the figures in the first quarter.
On the other hand, during the same period, Imo, Akwa Ibom, and Bayelsa states reduced their debts by N24.11 billion, N9.39 billion, and N7.54 billion, respectively.
Data from the Office of the Accountant General of the Federation on FAAC allocations to states shows that within the second quarter of 2025, all the states and the FCT collectively received N1.89 trillion from the Federation Accounts Allocation Committee. A breakdown of the figures shows that in April, the states received a net total allocation of N624.72 billion; in May, the figure was N617.53 billion, while in June, it increased to N648.78 billion.
However, it has also been observed that despite the increase in allocations to states, many of the states, because of low internally generated revenue (IGR) and lack of fiscal discipline, are grappling with financial crises, leading to borrowing to finance their budgets.
According to experts, most of the borrowed funds are spent on projects that have no direct impact on citizens.
They also warn that the rate at which the states are accumulating debts is leading to a structural crisis that demands urgent reforms in borrowing practices and stronger financial oversight.
According to Prof. Godwin Oyedokun of Lead City University, Ibadan, many states spend a substantial portion of their revenue on debt servicing, leaving the state with little resources for development projects. “Large portions of state revenue are allocated to debt servicing and interest payments, rather than essential sectors like health, education, and infrastructure projects,” he said, adding that the inability to adequately fund public services leads to poor infrastructure, inadequate healthcare, and educational facilities, ultimately affecting citizens’ quality of life.
The debt situation in the states mirrors what is happening at the national level, where the total public debt stock as at 30 June 2025 (second quarter) stood at N152.40 trillion ($99.66 billion). This indicates an increase of N3.01 trillion (2.01 per cent) when compared to the N149.39 trillion ($97.24 billion) recorded at the end of March 2025.
The country also spent N4.44 trillion in the second quarter of 2025 to service debt, indicating an increase of N862.57 billion (24.10 per cent) from the N3.58 trillion projected for the quarter.
A breakdown shows that a total of N1.71 trillion was used to service FGN domestic debt during the quarter, indicating a difference of N90.71 billion, or 5.05 per cent, below the prorated quarterly estimate, while external debt service during the period gulped N2.70 trillion as against the projected N1.69 trillion for the quarter, indicating a difference of N1.01 trillion, or 60.05 per cent, above the prorated sum.
