Debt

…Imo, Oyo, Kaduna, Enugu, Ogun lead new foreign borrowing

Twenty-six Nigerian states collectively expanded their external debt profiles in the first half of 2025, adding a combined $239 million in new foreign borrowings, according to recently released data from the Debt Management Office (DMO). The report highlights the varied approaches of subnational governments toward foreign debt, revealing that while several states pushed up their external loan commitments, others reduced their liabilities through aggressive repayments.

The DMO disclosed that Nigeria’s overall external debt stood at $46.98 billion, with states accounting for $4.812 billion—a marginal increase from $4.8 billion recorded at the start of the year. The relatively modest growth in state-level foreign debt reflects a balancing trend, where fresh loans were nearly offset by repayments from heavily indebted states.

Despite the slight net increase, the report shows a clear divergence in borrowing patterns across the federation. Some states significantly increased external obligations in the first six months of the year, while others made strong progress in paying down their debts.

States with the Largest New Borrowings

Five states represent the majority of the additional $239 million in external loans taken during the review period:

• Imo State registered the highest increase, adding $36.2 million, marking the sharpest growth among all subnationals.

• Oyo State followed closely with an additional $35.7 million, reflecting ongoing infrastructure and development-focused borrowing.

• Kaduna State increased its foreign debt by $33.6 million, continuing a multi-year pattern of accessing external financing for development programmes.

• Enugu State raised its foreign obligations by $27.3 million, while

• Ogun State expanded its debt profile by $21.8 million in the same period.

Beyond the top five, more moderate borrowing was recorded from other states. These include Katsina, which added $14.2 million, Borno with $8.7 million, and Kwara, Gombe, Nasarawa, Osun, and Plateau, which each expanded their debt stock by between $5.1 million and $6.7 million.

Additional states such as Akwa Ibom, Ebonyi, Abia, Yobe, Taraba, and Kogi posted smaller increments ranging between $2.9 million and $4.8 million.

States with the Lowest Increase

At the lower end of the spectrum, several states recorded minimal additions to their foreign debt portfolios:

• Adamawa added $2.1 million,

• Ondo, $2 million,

• Niger, $1.9 million, and

• Sokoto, $1.2 million.

The least additions came from Jigawa and Kebbi, each adding just over $1 million, while Zamfara and Bayelsa saw the smallest increases at $554,100 and $438,000, respectively.

Debt Reductions Offset Borrowing

Despite new loans from 26 states, the DMO noted that 11 states and the Federal Capital Territory (FCT) reduced their external debt through repayments, leading to a near-stable total national subnational debt figure. The largest reductions came from Lagos, Edo, Rivers, and Bauchi, which collectively accounted for $227 million in repayments.

This highlights the continued influence of high-debt states in shaping Nigeria’s overall debt dynamics, with repayments by these governments counterbalancing new borrowings from others.

Top Five Most Indebted States

As of the second quarter of 2025, Nigeria’s total public debt reached N152.39 trillion, up from N149.38 trillion in Q1. The five most indebted states accounted for N4.66 trillion of this figure.

Lagos State remains the country’s most indebted subnational, with total liabilities of N2.496 trillion—comprised of N1.04 trillion in domestic debt and N1.456 trillion in external borrowings, based on an exchange rate of N1,400/$1. Lagos’ debt reflects its economic size and its role as Nigeria’s commercial and financial hub.

Second on the list is Kaduna State, with total debt of N1.507 trillion, broken into N585.72 billion domestic and N922.18 billion external.

Rivers State comes third with N327.55 billion, followed by Delta State, with N232.16 billion, split between domestic and external liabilities.

The Federal Capital Territory (FCT) completes the top five with a total debt of N101.4 billion, having reduced its external obligations during the period.

The Federal Government has approved the payment of N185 billion to settle longstanding debts owed to natural gas producers, marking a major intervention aimed at restoring confidence in Nigeria’s gas market and stabilising electricity generation across the country. The decision reflects the administration’s broader energy reform agenda and underscores its commitment to resolving bottlenecks that have weakened gas supply to power plants for several years.

The payment was authorised by President Bola Ahmed Tinubu and formally endorsed by the National Economic Council (NEC) during its latest meeting chaired by Vice-President Kashim Shettima. Government officials describe the approval as one of the most significant energy-sector decisions taken since the administration assumed office, signalling a renewed focus on the gas-to-power value chain.

In a statement released on Thursday and reported by the News Agency of Nigeria (NAN), the Minister of State for Petroleum Resources (Gas), Dr. Ekperikpe Ekpo, said the settlement will provide immediate relief to gas supply companies, many of which have been affected by severe cash-flow gaps created by years of unpaid invoices. According to him, the N185 billion arrears stemmed from past supply obligations tied to electricity generation, and the backlog has placed considerable strain on producers’ operational capacity.

Ekpo noted that the delayed payments had discouraged new investments, slowed exploration activities, and reduced the capacity of suppliers to sustain gas injections into the national grid. As a result, many power plants struggled to access sufficient feedstock, contributing to the persistent shortfall in electricity generation that has affected homes, industries, and the wider economy.

To address these challenges, the approved settlement will be executed through a royalty-offset mechanism, which ensures that payments to suppliers are honoured while aligning with government fiscal priorities. The approach is expected to reduce uncertainty for operators in both domestic and international markets, many of whom have raised repeated concerns about Nigeria’s outstanding liabilities.

Describing the move as a “decisive step” for the sector, the Minister explained that the intervention directly supports the government’s flagship Decade of Gas initiative, a strategic programme designed to unlock up to 12 billion cubic feet per day (bcf/d) of gas supply by 2030. He stressed that rebuilding trust with gas producers will accelerate upstream investment, stimulate new field development, and enhance Nigeria’s energy security in the medium and long term.

Ekpo added that the benefits will extend beyond the gas industry, as improved supply to power plants will help restore output capacity, reduce outages, and ease the heavy energy constraints faced by businesses nationwide. According to him, adequate and reliable power is critical for industrial growth, job creation, and the competitiveness of Nigerian enterprises.

The Minister expressed confidence that clearing the debt backlog will also attract new capital to the sector, especially as transparency and fiscal discipline improve across the entire value chain. His position was reinforced by the Coordinating Director of the Decade of Gas Secretariat, Mr. Ed Ubong, who said the approval demonstrates President Tinubu’s determination to resolve structural weaknesses affecting the gas-to-power framework.

Ubong noted that the payment could unlock stalled projects and revive investor confidence, particularly in supply arrangements that have been frozen due to uncertainty over payments. He said the development positions Nigeria to move closer to its ambition of transitioning into a gas-driven economy.

The approval comes at a pivotal moment for the energy sector. Recently, the Federal Government concluded implementation frameworks for a N4 trillion government-backed bond intended to clear verified arrears owed to electricity generation companies (GenCos) and gas suppliers. Industry data shows that debts to gas producers have reached critical levels. In 2024, the Shell Petroleum Development Company (SPDC) disclosed outstanding payments of $1.3 billion, while regulatory authorities have reported more than N2 trillion owed to suppliers by the Federal Government and power generation firms.

In December 2024, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) instructed gas producers to halt supplies to indebted GenCos, highlighting the severity of the situation and the urgency of reform. The latest government action is therefore expected to ease tensions, restore supply flows, and support the country’s broader efforts to build a reliable and sustainable energy system.

The World Bank has disclosed that three major developing economies—Nigeria, Bangladesh, and Pakistan—now collectively hold close to 30% of the total external debt owed by countries eligible for International Development Association (IDA) financing. The figures were contained in the International Debt Report 2025, released by the global lender on Wednesday, offering fresh insight into the evolution of debt patterns among lower-income and emerging economies.

According to the report, the concentration of external debt among a small group of IDA countries has grown significantly in recent years, amid increased reliance on multilateral loans and limited access to affordable market financing. The findings come at a time when global financing conditions remain tight, and concerns over sustainability are rising, especially for highly indebted nations with narrow revenue bases.

Widening Debt Concentration and Changing Patterns of External Borrowing

The World Bank report notes that despite shifts in the global economic landscape, the fundamental structure of long-term external debt among IDA borrowers has remained relatively stable over the past decade. Public and publicly guaranteed (PPG) debt—which includes sovereign borrowing and private loans backed by government guarantees—still accounts for 75% of total IDA-eligible external debt, while private non-guaranteed (PNG) debt represents 25%.

In 2024, the stock of PPG debt grew 2.8% to $816.5 billion, reflecting continued dependence on official lending and the limited ability of many low-income economies to access private capital without sovereign backing. In contrast, PNG debt recorded a slight decline, falling to $241.9 billion, a trend driven by weaker private sector borrowing and risk aversion among global lenders.

The report also highlights an increasingly concentrated debt profile, where just seven countries out of the top ten borrowers now hold more than half of all IDA-eligible external debt. The list of the ten largest borrowers includes China, India, Brazil, Mexico, Türkiye, Indonesia, Argentina, Colombia, Ukraine, and Thailand. While Nigeria, Pakistan, and Bangladesh do not appear in the top ten globally, they collectively dominate the debt profile for IDA-eligible economies.

Sharp Increase in Debt Inflows Driven by Short-Term Borrowing

Debt inflows to IDA-eligible countries surged in 2024, with net debt inflows rising 18.6% to $53.1 billion. The World Bank attributes this increase to a dramatic shift in short-term debt flows, which moved from an outflow position of $10.6 billion in 2023 to an inflow of $5.6 billion in 2024. This reversal reflects short-term borrowing pressures to support balance of payment needs, manage currency stability, and fund essential imports in the face of rising global inflation.

Long-term debt inflows, however, fell 14.4%, though they remained positive at $47.4 billion, still higher than in 2022. The report reveals that long-term flows to PNG borrowers turned negative for the first time in decades, moving from an inflow of $7.3 billion to an outflow of $567 million. The World Bank attributes this shift to reduced appetite among commercial banks and private creditors, whose combined net flows turned negative for the first time since 1999.

Rising Concerns for Nigeria’s Fiscal Outlook

The report amplifies growing concern among analysts that Nigeria’s public debt has reached levels that could undermine fiscal stability if reforms fail to accelerate. With Nigeria now ranking among the three largest IDA-eligible borrowers, its borrowing concentration raises policy questions about the sustainability of external debt servicing and the country’s vulnerability to exchange rate shocks and tightening conditions in global financial markets.

Financial experts have repeatedly warned that Nigeria’s public debt trajectory is approaching critical thresholds, where debt servicing could significantly crowd out essential spending on health, education, infrastructure, and social programmes. The report notes that countries like Nigeria must deepen debt transparency, strengthen domestic revenue mobilization, and adopt more prudent borrowing strategies to reduce exposure.

Nigeria’s Debt Position Continues to Rise

Data from the Debt Management Office (DMO) shows that Nigeria’s total public debt climbed to ₦152.39 trillion in the second quarter of 2025, up from ₦149.38 trillion recorded in Q1. The country’s external debt stood at $46.98 billion (₦71.85 trillion) in June 2025, a rise from $45.98 billion (₦70.63 trillion) recorded in March.

Debt servicing costs have also increased. The DMO reported that Nigeria spent $932.1 million servicing external debt in Q2 2025, reflecting pressures from currency depreciation and rising global interest rates.

Need for Policy Action

With debt concentration intensifying, the World Bank urges vulnerable economies—including Nigeria—to enhance fiscal discipline, improve the efficiency of public spending, and embrace reforms targeted at expanding domestic revenue sources. The report argues that without decisive policy action, rising debt could stifle long-term growth and limit access to development financing needed for poverty reduction.

Nigeria’s total public debt stock continued its upward trajectory in the second quarter of 2025, reaching N152.39 trillion, according to newly released figures by the National Bureau of Statistics (NBS). The report, published on Monday, shows that the country’s total debt grew by 2.01% quarter-on-quarter, up from N149.38 trillion recorded in Q1 2025.

This latest increase underscores Nigeria’s deepening fiscal concerns, driven by expanding domestic and external borrowing needs, continuous revenue shortages, and structural inefficiencies hampering debt sustainability.

Breakdown of External and Domestic Debt

The NBS highlighted that Nigeria’s external debt climbed to N71.84 trillion (approximately $46.98 billion) in Q2 2025. Meanwhile, domestic debt rose to N80.55 trillion (about $52.67 billion).

In naira terms, external obligations accounted for 47.14% of total public debt, while domestic borrowings made up 52.86%. Analysts note that this split reflects the Federal Government’s attempt to maintain a balance between relatively cheaper foreign loans and the more predictable, but costlier, domestic debt instruments.

State-by-State Debt Distribution

The report also provided a detailed subnational breakdown of indebtedness.

Lagos State retained its position as the country’s most indebted state domestically, with a debt portfolio of N1.04 trillion in Q2 2025. It was followed by Rivers State, whose domestic debt stood at N364.39 billion. These two states, both major economic hubs, have consistently topped the debt charts due to their extensive infrastructure plans and large-scale development financing needs.

On the opposite end of the spectrum, Jigawa State recorded the lowest domestic debt at N852.49 million, followed by Ondo State, with N10.64 billion.

In terms of external subnational debt, Lagos again led with $1.04 billion, followed by Kaduna State with $658.70 million. The Federal Capital Territory (FCT) reported the lowest external debt figure at $19.26 million.

Federal Government Borrowed N6.17 Trillion in Six Months

Further insights from the Debt Management Office (DMO) reveal that the Federal Government borrowed heavily from the domestic market in the first half of 2025, securing N6.17 trillion within the six-month period.

Of this amount, N4.48 trillion was raised in Q1 2025, with an additional N1.70 trillion sourced in Q2. The borrowings were mobilized through traditional domestic instruments such as:

• FGN Bonds,

• Nigerian Treasury Bills (NTBs), and

• Promissory Notes (P-Notes).

The Q2 borrowing figure represents a 2.26% increase compared to the previous quarter, marking continued fiscal pressures as the government seeks resources to finance budget deficits and critical expenditures.

Debt Service Burden Intensifies

Nigeria’s external debt service costs remain elevated. Nairametrics earlier reported that the country spent $932.1 million on external debt servicing in Q2 2025 alone.

A breakdown from the DMO shows that:

• Multilateral lenders received $629.38 million—roughly 68% of all external debt service payments.

• Bilateral creditors, including JICA, China Development Bank (CDB), and Agence Française de Développement (AFD), were paid $41.18 million collectively.

• Commercial lenders, such as Eurobond holders and Unicredit SPA, received a total of $261.55 million.

The data highlights the mounting pressure of debt servicing on Nigeria’s already constrained revenue base.

Growing Concerns Over Debt Sustainability

Economic and capital-market experts continue to sound the alarm over Nigeria’s growing debt load. Speaking at the Capital Market Academics of Nigeria (CMAN) Q4 2025 Virtual Symposium, analysts warned that the country’s public debt profile is approaching unsustainable territory.

They noted that despite the government’s insistence that Nigeria’s debt-to-GDP ratio remains within global limits, the real challenge lies in:

• weak and insufficient government revenues,

• rising interest and debt-service obligations, and

• persistent structural bottlenecks that limit fiscal flexibility.

These factors, experts caution, could erode Nigeria’s long-term financial stability and complicate future borrowing efforts.