Despite a marginal 4.89% year-on-year (YoY) decline in total subnational debt, Nigeria’s 10 most indebted states saw their combined debt rise by 2.49% YoY in Q1 2025, reaching N2.48 trillion, up from N2.42 trillion in Q1 2024.
The debts of these states combined now account for 64.05% of the country’s total subnational debt.
The debt profile of Nigerian states has seen significant shifts in Q1 2025, with Lagos maintaining its position as the most indebted state despite a year-on-year (YoY) decline.
Meanwhile, states like Rivers, Enugu, and Niger recorded staggering increases in their debt burdens.
The latest data released by Debt Management Office (DMO) shows a reshuffling in Nigeria’s subnational debt landscape, driven by a blend of fiscal constraints, infrastructure ambitions, oil revenue shifts, and tighter federal allocations.
This analysis explores the debt trends of the top 10 states and the key factors driving their year-on-year changes.
The 10 most indebted Nigerian states in Q1 2025
Akwa Ibom recorded a year-on-year decline of 17.3% from N142.93 billion in Q1 2024 to N118.21 billion in the review period, despite its status as an oil-rich state and beneficiary of the 13% derivation fund. This state debt profile contributed 4.77% to the total debt of the top 10 states and 3.06% to the total subnational debt in Q1 2025.
The lower debt profile is attributed to high oil derivation revenues and conservative borrowing policies. The state also continues to attract direct investments into its industrial and tourism sectors, potentially offsetting the need for debt-heavy budgets.
According to the Akwa Ibom State Q1 2025 Budget Implementation Report, the state recorded a significant revenue inflow of N77.9 billion from both FAAC and internally generated sources, representing 33.5% of its annual revenue target. This strong revenue performance reduced the need for new borrowing and enabled the state to service existing debts more aggressively.
Additionally, the state’s capital expenditure in Q1 2025 was N133.9 billion, which is only 20.4% of the approved N655 billion capital budget. This indicates a cautious approach to project execution, likely aimed at controlling debt accumulation.
Imo reduced its debt from N163.06 billion in Q1 2024—a notable 25.12% drop to N122.09 billion, following higher oil revenue allocations. Imo state debt contributed 3.16% to the total subnational debt profile, and 4.93% to the top 10 indebted states in the country.
This state’s decline is driven by successful debt renegotiations, better cash management, and fewer new capital commitments.
According to Governor Hope Uzodimma during the State of Imo Address at the State House of Assembly in Owerri on June 25, 2025, the state has witnessed a significant reduction in its debt profile, slashing it from N259 billion in 2020 to N99 billion in 2025 without resorting to fresh borrowing.
The state administration emphasized cost control, transparency, and accountability in public finance, which helped reduce recurrent expenditure and free up funds for debt servicing. Also, Imo’s IGR reportedly grew from N400 million in 2020 to nearly N4 billion in 2025, driven by digital reforms, tax system modernization, and improved compliance.
Furthermore, the government focused on completing existing projects rather than initiating new ones, thereby reducing the need for additional borrowing. Over 120 roads and major infrastructure like the Emmanuel Iwuanyanwu International Centre were completed using internally sourced funds.
Benue maintained a moderate debt rise of 11.21%, from N116.73 billion in Q1 2024 to N129.82 billion in Q1 2025, as insecurity and resettlement efforts continue to strain its finances.
According to the Benue State Debt Sustainability Analysis (DSA) and Medium-Term Debt Strategy (MTDS) Report, the state’s debt trajectory is shaped by its medium-term fiscal framework, which includes assumptions about revenue mobilization, expenditure control, and macroeconomic conditions such as exchange rates and oil prices. Despite efforts to improve Internally Generated Revenue (IGR) through tax reforms and automation, the state still faced a significant fiscal gap.
The Q1 2025 Budget Performance Report reveals that Benue saw debt servicing jump over tenfold from N1.99 billion in Q4 2024 to N21.40 billion in Q1 2025. This dramatic increase was largely financed through FAAC allocations, with N16.22 billion of the N58.71 billion received from the federal government diverted to debt repayment. This indicates a growing dependence on federal transfers to meet debt obligations, rather than internally generated funds.
Furthermore, Benue was among seven Nigerian states that spent over 190% of their IGR on debt servicing in Q1 2025, highlighting the severity of its fiscal strain. While IGR rose to N5.18 billion from N1.98 billion, it was still insufficient to cover the ballooning debt service costs, which accounted for 31.6% of total state expenditure.
The debt uptick might reflect spending on humanitarian needs, salary arrears, and rural development projects, compounded by challenges in IGR mobilization due to farmer-herder conflicts.
Bauchi added over N34 billion (31.38%) in new debts within the year, to N142.40 billion, signaling intensified spending on social infrastructure and governance reforms.
The rise is driven by a combination of escalating debt servicing costs, low internally generated revenue (IGR), and inefficient fiscal management.
According to the Q1 2025 Budget Implementation Report, Bauchi State spent N11.20 billion on debt servicing, which is 225% of its IGR of N4.97 billion. This disproportionate ratio underscores the state’s growing reliance on federal allocations to meet its debt obligations. In Q4 2024, Bauchi had spent N16.68 billion on debt servicing, indicating a persistent fiscal strain despite marginal improvements.
Also, administrative inefficiencies, such as delayed salary payments to local government workers, which reflect broader issues in budget execution and financial planning, contributed to this decline. These lapses erode public trust and reduce productivity, compounding the state’s fiscal challenges.
Niger’s debt rose from N86.07 billion in Q1 2024, an uptick of 67.07% to N143.75 billion, indicating fresh funding for major projects, particularly in agriculture and power. This debt stock of the state contributed 3.56% to the total subnational debt profile in the review period.
Given Niger’s vast land and access to river basins, the state may be positioning for agro-industrial financing or taking advantage of federal loan windows, including the Infrastructure Support Fund (ISF).
According to the Q1 2025 Budget Implementation Report, Niger State’s IGR stood at N12.13 billion, while debt servicing obligations reached N12.43 billion—meaning 102.4% of the state’s IGR was used to service debt. Although this was an improvement from Q4 2024, when IGR was N5.44 billion and debt service was N9.27 billion, the state still required N296 million from its FAAC allocation to meet its debt obligations.
The report also shows that debt servicing accounted for 23.2% of the state’s total expenditure of N53.51 billion in Q1 2025.
The Niger State Debt Sustainability Analysis (DSA) further reveals that the state’s debt trajectory is influenced by its Medium-Term Expenditure Framework (MTEF), which prioritizes capital-intensive sectors like security, agriculture, and infrastructure.
Enugu posted the most aggressive year-on-year debt spike of 128.46% among the top 10, rising from N82.48 billion to N188.42 billion, thereby tripling in value. This staggering increase contributed 7.60% to the total debt stock, and it stems from massive infrastructure financing, including the Enugu Metro Rail and new international airport terminal.
According to the Enugu State Debt Sustainability Analysis and Debt Management Strategy Report (2024–2033), the state government adopted a proactive fiscal stance to accelerate infrastructure development, particularly in transport, education, and healthcare. This strategy is aligned with the state’s Medium-Term Expenditure Framework (MTEF), which prioritizes capital investment over recurrent spending to stimulate long-term economic growth.
The Q1 2025 Budget Implementation Report further reveals that the surge in debt was partly due to the implementation of the state’s N971 billion “Exponential Growth and Inclusive Prosperity” budget, which includes large-scale infrastructure projects and economic reforms. These projects are expected to be financed through a mix of domestic borrowing, development partner loans, and public-private partnerships.
Ogun’s debt declined from N221.22 billion in Q1 2024 to N190.14 billion in Q1 2025, reflecting a 14.05% reduction.
The state continued its debt-reduction trajectory, driven by a combination of strategic debt management, enhanced internally generated revenue (IGR), and targeted capital investment.
According to the Ogun State Commissioner for Finance, Dapo Okubadejo, the state has adopted a judicious approach to borrowing, ensuring that nearly 80–90% of its debt is tied to capital infrastructure projects that directly enhance revenue generation. This strategic alignment between borrowing and economic productivity has enabled the state to begin repaying its obligations more aggressively.
Also, Ogun’s recent focus on improving IGR—especially from land use and transportation—might be paying off, reducing reliance on external loans. The state’s strategic industrial corridor may also have attracted private investments that offset the need for heavy borrowing.
The state’s 2024 budget, valued at over N703 billion, was designed to be funded largely through IGR, with an estimated N240 billion expected from internal sources. This strong revenue base has reduced Ogun’s dependence on federal allocations and allowed for debt servicing without accumulating new liabilities.
Furthermore, the state’s debt sustainability strategy emphasizes borrowing only at low cost and risk and prioritizes repayment over expansion of debt stock. This has led to a gradual decline in the debt burden, as reflected in the Q1 2025 figures.
Delta recorded the largest year-on-year drop of 38.87%, among the top four states with declines, with its debt stock falling from N334.90 billion to N204.72 billion.
The state may have benefited from the Debt Management Office’s refinancing programs or utilized excess crude savings to pare down existing obligations. Additionally, project completion and lower capital spending post-election might have contributed to the decline.
According to the Delta State Government’s Debt Sustainability Analysis (DSA) and Debt Management Strategy (DMS), the administration under Governor Sheriff Oborevwori implemented a strategic debt reduction plan aligned with the State Fiscal Transparency, Accountability and Sustainability (SFTAS) program. This plan emphasized minimizing domestic arrears and prioritizing debt servicing over new borrowing.
The state reportedly saved over N205 billion in operating costs within one year and two months of the current administration, while simultaneously reducing its debt burden by N180 billion.
Additionally, the state’s capital expenditure performance in Q1 2025 stood at 16.5% of the annual capital budget, indicating a cautious approach to project execution and a deliberate effort to avoid overextension.
Rivers State saw a massive 56.68% surge in its debt profile, rising from N232.58 billion to N364.39 billion—one of the steepest among the top 10 states.
According to data compiled by the Debt Management Office (DMO), Rivers State undertook a series of large-scale capital projects following the 2023 elections, which significantly expanded its borrowing needs. These projects included investments in roads, schools, hospitals, and urban renewal schemes aimed at boosting long-term economic growth and improving public service delivery.
Despite the increase in debt, Rivers maintained a strong Internally Generated Revenue (IGR) to operating expense ratio of 121.26%, which provided some fiscal buffer for its aggressive borrowing strategy. This suggests that the state’s revenue base was relatively strong, allowing it to absorb higher debt levels without immediate liquidity risks.
The state’s fiscal strategy also reflects a shift toward front-loaded borrowing, where funds are raised early to accelerate project execution. This approach, while effective for rapid development, raises concerns about long-term debt sustainability, especially if revenue projections fall short or project returns are delayed.
Lagos retained its spot as Nigeria’s most indebted state, accounting for 35.27% of the debt among the top 10 states. However, its total debt stock declined from N929.41 billion in Q1 2024 to N874.04 billion in Q1 2025.
The dip is attributed to improved internally generated revenue (IGR), better debt servicing, and strategic fiscal reforms, as outlined in the Lagos State Debt Sustainability Analysis (DSA) and corroborated by national debt data from the Debt Management Office (DMO). Despite its heavy infrastructure load, Lagos continues to leverage alternative financing models, including public-private partnerships, which may be easing its direct debt burden.
According to the DMO, Lagos remains Nigeria’s most indebted state but has managed to reduce its debt by N35.03 billion within the review period.
According to the Lagos State Government Q1 2025 BUDGET IMPLEMENTATION REPORT, Lagos State recorded a cumulative recurrent revenue of N582.45 billion in Q1 2025, representing 78% of the quarterly revenue target of N722.90 billion and 20% of the full-year revenue projection of N2.915 trillion. This robust revenue inflow, largely driven by Internally Generated Revenue (IGR), reduced the need for new borrowing and supported debt repayment.
Also, the state’s recurrent expenditure, which includes debt servicing, stood at N251.21 billion, or 77.56% of the Q1 projection. This indicates that Lagos prioritized meeting its debt obligations within its budgetary framework, aligning with its medium-term debt sustainability strategy.
Furthermore, the report reviews that the state’s borrowing strategy in Q1 2025 was conservative, with no significant new debt issuance reported. Instead, the focus was on repaying maturing obligations, particularly domestic bonds, which contributed to the overall reduction in debt stock.
What you should know
- While some states are tightening their debt profiles, others are ramping up borrowing to meet development targets. The variation in debt performance reflects underlying differences in fiscal discipline, IGR capacity, infrastructure backlog, and strategic priorities.
- With total state debt still hovering near N3.87 trillion in Q1 2025, a 4.89% decline from N4.07 trillion in Q1 2024, the focus for both federal and subnational governments must now shift toward improving debt efficiency, expanding revenue bases, and ensuring borrowed funds translate to real economic returns.
- As Nigeria moves deeper into the second half of 2025, the fiscal choices of these states will be critical to their economic sustainability and investor confidence.
