Nigerian states collectively spent about N235.58bn on servicing external debt obligations in the first half of 2025, according to an analysis of Federal Account Allocation Committee (FAAC) disbursement data released by the National Bureau of Statistics (NBS).
The figure represents a sharp increase of N95.65bn or 68.4 per cent compared with the N139.92bn recorded in the corresponding period of 2024, highlighting the growing impact of dollar-denominated debt repayments on state finances amid the naira’s depreciation.
External debt servicing for states is handled by the Federal Government through an Irrevocable Standing Payment Order (ISPO), which authorises automatic deductions from their monthly FAAC allocations.
Under this arrangement, once an external loan is approved and a subsidiary agreement executed, the Office of the Accountant-General of the Federation, in collaboration with the Federal Ministry of Finance and the Central Bank of Nigeria, deducts the agreed debt service amount before releasing allocations to the states.
Analysts warn that the rising debt service burden could further limit states’ fiscal space for capital investments and essential public services if currency pressures persist.
