Fresh figures from the National Bureau of Statistics (NBS) and the Debt Management Office (DMO) have revealed that thirty-one Nigerian states are weighed down by a combined domestic debt of ₦2.57 trillion, while failing to attract any foreign investment in the first quarter of 2025.
At the heart of this troubling picture is Enugu State, which recorded a domestic debt profile of ₦188.42 billion, placing it among the top five most indebted states in Nigeria. Despite making some adjustments, the state continues to grapple with rising obligations, underscoring the urgent need for stronger revenue generation strategies and investment-friendly policies to break free from debt dependence.
Closely following Enugu in the debt ranking is Rivers State, which posted the highest increase in domestic debt, rising to ₦364.39 billion after adding ₦131.82 billion in just one year. This sharp escalation has drawn concerns from financial analysts who warn that such borrowing patterns could strain the state’s long-term fiscal stability.
Other states facing heavy domestic debt burdens include Delta (₦204.72 billion), which however recorded the most significant debt reduction of ₦130.17 billion, Imo (₦122.09 billion), and Cross River (₦115.12 billion). Together, these states form the core of Nigeria’s subnational debt crisis.
The situation is compounded by the absence of foreign capital inflows in these states. According to the NBS report, only Lagos, Abuja, Kaduna, Kano, Ogun, and Oyo managed to attract foreign investments in Q1 2025. Of this, Abuja led with $3.05 billion, followed by Lagos with $2.56 billion, jointly accounting for over 99 percent of all foreign capital inflows into Nigeria’s subnational entities.
In contrast, the 31 states with zero foreign investment inflows carried 66.5 percent of Nigeria’s total subnational domestic debt, reflecting a dangerous imbalance between debt servicing and revenue generation. While 21 states managed to reduce their debt profiles, 10 states recorded an increase of ₦417.71 billion, effectively wiping away most of the fiscal gains made by others.
Among the states that reduced their obligations, Abia cut ₦65.04 billion, Bayelsa ₦29.7 billion, and Imo ₦40.97 billion, signaling mixed performances across regions.
Reacting to the report, the Director-General of the DMO, Patience Oniha, urged states to move away from unsustainable borrowing and embrace Public-Private Partnerships (PPPs), alongside reforms aimed at boosting tax revenues. Economists also warned that weak infrastructure, policy inconsistency, and insecurity remain major barriers preventing states like Enugu, Rivers, and others from attracting direct foreign investments.
With the 2027 general elections on the horizon, analysts caution that unless states aggressively reform their revenue models and create more investor-friendly environments, Nigeria’s subnational debt crisis could deepen further, leaving most states perpetually dependent on federal allocations.
