Economy

Nigerian State Debt Crisis Deepens Amid Investor Apathy

Published

7 months ago

September 10, 2025

Nigerian state debt crisis worsens as 31 states attract no foreign capital in Q1 2025 while owing N2.57tn in domestic debt

Nigerian state debt crisis is escalating as 31 states attracted no foreign capital in Q1 2025 while carrying a combined domestic debt burden of N2.57 trillion, according to new data from the National Bureau of Statistics and the Debt Management Office.

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This paints a stark picture of worsening fiscal fragility and limited investor confidence across most of Nigeria’s subnational entities.

The capital importation report reveals a deepening divide between a handful of fiscally attractive states and a majority stuck in financial stagnation.

While Lagos, Abuja, and four other states pulled in a combined $5.63 billion in foreign investments, no other state attracted measurable inflows.

This leaves 31 states fully dependent on federal allocations and local borrowing to fund operations — a situation analysts say is unsustainable.

These 31 states owe N2.57tn, representing 66.5% of Nigeria’s total subnational domestic debt, a jump from 64.7% a year earlier.

While total subnational debt fell slightly from N4.07tn to N3.87tn, the relative burden carried by debt-heavy states grew — a sign that some states are borrowing more aggressively, even as others are making efforts to reduce their obligations.

Top five debtors among these states include:

Rivers: N364.39bn (↑ N131.82bn)
Delta: N204.72bn (↓ N130.17bn)
Enugu:N188.42bn (↑ N105.95bn)
Imo: N122.09bn (↓ N40.97bn)
Cross River:N115.12bn (↓ N41.05bn)

Only six entities — FCT Abuja, Lagos, Kaduna, Kano, Ogun, and Oyo — attracted foreign capital in Q1 2025.

Together, they reduced their domestic debt by N142.35bn, showing signs of deliberate fiscal consolidation.

Key performers:

Abuja:$3.05bn inflow, debt cut by N32.89bn
Lagos:$2.56bn inflow, debt cut by N55.37bn
Ogun:$7.95m inflow, debt cut by N31.08bn

Despite attracting over 99% of capital inflow, Lagos remains Nigeria’s most indebted state, responsible for nearly 68% of the total debt owed by the six capital-attracting states.

While 21 states reduced their debt, 10 states increased theirs by N417.71bn. These include:

Rivers (↑ N131.82bn)
Enugu (↑ N105.95bn)
Niger (↑ N57.68bn)
Taraba (↑ N50.29bn)
Bauchi, Edo, Benue, Gombe, Kwara, Nasarawa also saw upticks

This wide divergence in fiscal behavior highlights a growing inequality in governance capacity and economic viability across Nigeria.

The Director-General of the DMO, Patience Oniha, has urged state governments to shift from borrowing to Public-Private Partnerships (PPPs) and internally generated revenue (IGR) strategies.

“Borrowing should not be the major way to source funds. You must increase your revenues through tax reforms and efficiency,” she said at a recent World Bank-supported workshop.

According to Oniha, PPPs offer faster, higher-quality infrastructure delivery while reducing fiscal strain, creating jobs, and enhancing transparency.

Prof. Jonathan Aremu, ECOWAS Investment Consultant:

“Most states lack investor-friendly conditions. Investments are crisis-shy — they avoid instability and unpredictability.”

Dayo Adenubi, Macroeconomic Analyst:

“States need to aggressively target IGR growth, improve compliance, and reduce overdependence on federal allocations.”

The Nigeria Governors’ Forum recently launched “Investopedia” to help states access global and African capital.

NGF Chair and Kwara Governor AbdulRahman AbdulRazaq said the platform aims to “unlock capital, accelerate infrastructure, and boost inclusive growth.”

But experts warn that unless states improve governance, security, and economic fundamentals, capital platforms alone may not solve the Nigerian state debt crisis.

With 31 states locked out of foreign capital inflows and increasingly dependent on domestic borrowing, Nigeria’s subnational debt profile is tilting toward risk.