The sharp rise in Nigeria’s foreign debt deductions calls for serious concern, as states are repaying loans while their fiscal space is shrinking.
Development Diaries reports that figures from the Federation Accounts Allocation Committee (FAAC) released by the National Bureau of Statistics (NBS) show that states paid N455.38 billion in foreign debt service in 2025, up from N362.08 billion in 2024.
According to an analysis by The Punch, in 2025, a bigger portion of states’ FAAC allocations went to servicing external loans than in 2024, leaving them with less money for salaries, capital projects, and everyday government operations.
The pattern of long, flat monthly deductions shows these are structured repayment schedules, and the problem is that these predictable deductions now take a bigger bite from funds meant for governance and service delivery.
This points to a failure in state public finance accountability and debt governance. Many citizens cannot answer basic questions like, what were these loans for? Which projects did they fund? What changed because of them?
Borrowing decisions are often opaque, debt terms are not widely disclosed, and there is little public tracking of whether the borrowed money created assets that improve the economy. When debt service rises but citizens cannot see the benefits, trust in governance weakens.
There are also deeper structural risks. Some of the sharp increases, especially in states like Rivers and Ogun, may be linked to exchange rate exposure, maturing repayment schedules, or restructuring that changed deduction terms.
Due to the fact that these are foreign loans, naira repayments can rise sharply when the exchange rate worsens, even if the dollar amount remains the same.
At the same time, many states still depend heavily on FAAC and have low internally generated revenue, meaning debt service places them under high revenue pressure.
Responsibility sits with clear duty-holders. Governors and state executive councils initiate borrowing and execute projects, state houses of assembly approve loans and must demand project-by-project disclosure; and state ministries of finance and debt units manage repayment schedules and risk exposure.
The Debt Management Office and federal fiscal authorities set guardrails for subnational borrowing; state auditors-general must audit debt-funded projects and publish findings, while contracting ministries, departments and agencies must show what was delivered with the loans.
Citizens should now make practical demands and ask every state to publish a Debt Transparency Pack showing loan terms, repayment schedules, FX exposure, and projects funded.
They should demand a quarterly debt-to-services budget table showing how debt deductions affect health, education, water, and capital spending.
Communities should verify debt-funded projects in their areas and publish findings, while state assemblies should be pressured to pass debt responsibility laws and stop borrowing for recurrent spending.
