States and LGs Repay N547.5bn Bank Debts Amid Revenue Surge

Nigerian states and local government councils repaid N547.52 billion in bank debts between June 2024 and June 2025. This reduced their collective borrowings from commercial and merchant banks by 20.4 per cent year-on-year. Data from the Central Bank of Nigeria’s latest Quarterly Statistical Bulletin showed banking sector claims on sub-national governments dropping from N2.68 trillion in June 2024 to N2.13 trillion in June 2025.

The sharpest decline occurred in June 2025, with a month-on-month repayment of N313 billion from May’s N2.45 trillion. Earlier drops included N292 billion cleared between January 2024 (N2.73 trillion) and January 2025 (N2.44 trillion). Exposure fluctuated slightly in early 2025 but trended downward overall.

Higher Federation Account Allocation Committee inflows drove the repayments. States and local governments jointly received N12.67 trillion in 2025, excluding the 13 per cent derivation fund, up from N8.96 trillion in 2024—a rise of N3.71 trillion or 41.4 per cent. Including derivation, totals reached N14.28 trillion in 2025 versus N10.31 trillion in 2024.

States’ FAAC share grew from N5.19 trillion in 2024 to N7.31 trillion in 2025. Local governments saw allocations increase from N3.77 trillion to N5.35 trillion. Monthly peaks hit N727.17 billion for states and N529.95 billion for councils in October 2025.

High interest rates also discouraged new borrowing. The Central Bank of Nigeria’s Monetary Policy Rate rose to 27.50 per cent by late 2024 before minor adjustments in 2025.

The Nigeria Extractive Industries Transparency Initiative noted financial strain on some states despite high allocations. Many with high debt ratios ranked lower in FAAC receipts but higher in deductions, raising concerns over fiscal health.

Debt Management Office Director-General Patience Oniha advised states to boost tax revenues and use public-private partnerships instead of loans. “Borrowing should not be the major way to source funds,” she said, highlighting PPPs for infrastructure without heavy government burden.

This debt reduction offers relief for sub-national finances amid economic pressures, though sustainability concerns linger for heavily indebted states.