Oyo Tops as 20 States Secure N458bn Loans Despite Higher Allocations

Oyo State is topping the list as no fewer than 20 state governments borrowed a combined N458 billion in the first half of 2025 despite receiving increased allocations from the federation account.

The fresh borrowing comes amid rising concerns over the burden of external debt servicing which has continued to eat deep into state finances.

According to Punch, the figures show that the states spent about N235.58 billion on external debt servicing within the six month period. 

This marks a sharp rise of N95.65 billion or 68.4 per cent compared to the N139.92 billion spent in the first half of 2024.

An analysis of disbursement figures released by the National Bureau of Statistics revealed that the Federation Account Allocation Committee shared N10.13 trillion among the three tiers of government in the first six months of the year. 

Out of this, the states received N3.425 trillion representing a 42.96 per cent increase from the N2.396 trillion they got in the same period of 2024.

Monthly allocations to states rose significantly from N379 billion in January 2024 to N590.6 billion in January 2025. 

The upward trend continued through June when states received N607 billion compared to N461.97 billion in the same month of 2024.

But despite this windfall budget implementation reports from the second quarter of 2025 showed that about 20 states still turned to fresh loans both foreign and domestic totaling N457.66 billion. 

Oyo topped the list with a domestic loan of N93.4 billion followed by Kaduna and Lagos which secured N62 billion foreign and N50 billion domestic respectively.

Other states on the borrowing list include Gombe N20.3bn Zamfara N28bn Katsina N20.7bn Kebbi N7.4bn Jigawa N10.98bn Bauchi N26.3bn mixed Borno N18.2bn Taraba N18.7bn Sokoto N15bn Niger N25.8bn Kwara N2.18bn and Ekiti N19.8bn. Ondo Abia Ebonyi and Enugu also obtained fresh foreign loans of N5.6bn N7bn N10.9bn and N10.7bn respectively.

“Since most of the debts are dollar denominated every depreciation of the local currency automatically inflates repayment obligations forcing states to channel a larger share of their revenues into debt servicing at the expense of development projects” says a Professor of Economics at the Ekiti State University Taiwo Owoeye.

Beyond the rising repayment costs Owoeye warned that mounting foreign loans also threaten states financial independence.

“By taking on more foreign obligations many states risk mortgaging future federal allocations to meet repayment schedules leaving them with little room to respond to emergencies or fund critical sectors such as health education and infrastructure” he explained.