Nigeria’s subnational debt burden deepened in 2025, underscoring mounting fiscal pressures across states as governments relied more heavily on borrowing to sustain spending and bridge revenue gaps.
Fresh data from the Debt Management Office showed that the combined debt stock of the 36 states and the Federal Capital Territory rose to N4.36 trillion, up from N3.97 trillion in 2024.
The N392.41 billion increase represents a 9.89 per cent year-on-year rise and reflects a mix of new borrowings, exchange rate pressures on external obligations and the continued struggle of states to expand internally generated revenue.
For many state governments, borrowing has become a key instrument for funding infrastructure projects, meeting salary obligations and cushioning the impact of a still-fragile macroeconomic environment marked by inflation, foreign exchange volatility and slowing consumer demand.
A closer review of the figures showed a heavy concentration of debt among a few economically dominant states. The top 10 most indebted states accounted for N2.96 trillion, nearly 68 per cent of the total, highlighting the uneven fiscal landscape across the federation.
The trend suggests that larger and more industrialised states are not only borrowing more but are also more exposed to long-term debt sustainability risks.
Even more striking is the dominance of a small group of states. Lagos, Rivers, Delta, Ogun and the FCT together accounted for about N2.26 trillion, more than half of the total subnational debt stock. This has renewed concerns over structural imbalances in which a handful of states drive both economic activity and debt accumulation.
Lagos remained the most indebted state, with a total debt profile of N1.04 trillion. That figure alone represents 27.97 per cent of the entire subnational debt stock, meaning the state carries more than a quarter of all state-level obligations. Lagos’ borrowing has largely been linked to its extensive infrastructure agenda, transportation expansion and megacity demands, though the size of the debt portfolio continues to attract scrutiny over sustainability and repayment capacity.
Amid the broader upward trend, Benue State stood out as the only state among the top 10 to reduce its debt stock. The state cut its obligations by 12.52 per cent from N122.58 billion in 2024 to N107.23 billion in 2025.
The reduction points to deliberate fiscal tightening, whether through stronger debt servicing, limited fresh borrowing or restructuring of existing liabilities.
However, while lower debt levels may improve fiscal indicators, they can also limit spending on capital projects, which may slow infrastructure development and economic expansion if not balanced with revenue growth.
Overall, the figures paint a picture of rising fiscal strain at the subnational level, with increasing dependence on debt and widening disparities among states. Without stronger revenue mobilisation, prudent borrowing strategies and more disciplined public finance management, analysts warn that many states could face heightened debt vulnerabilities in the years ahead.
