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States’ Foreign Debt Service Jumps 26% to N455bn, Squeezing FAAC Allocations

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Nigeria’s 36 states paid a combined N455.38bn to service foreign loans in 2025, marking a 25.77 per cent increase from the N362.08bn recorded in 2024, according to Federation Accounts Allocation Committee (FAAC) data released by the National Bureau of Statistics and analysed by The PUNCH.

The N93.30bn year-on-year rise underscores growing fiscal pressure on subnational governments, as a larger share of their monthly FAAC inflows is now automatically deducted at source to meet external debt obligations.

Tighter Fiscal Space

Foreign debt service in the FAAC framework operates as a first-line charge, meaning deductions are made before states access their allocations. While this structure safeguards creditors and ensures repayment discipline, it also narrows states’ discretionary spending space—particularly in periods of revenue volatility.

The 2025 monthly pattern reflected a “step-down” structure rather than sharp fluctuations. Deductions stood at N40.09bn in January before easing to N39.10bn in February. The N39.10bn level persisted from March through July, suggesting predictable repayment schedules.

A second adjustment occurred in August, when total deductions declined to N36.14bn—a 7.56 per cent drop from July—and remained at that level through December.

This contrasts with 2024, when debt service figures swung sharply in the first quarter—rising from N9.88bn in January to N40.41bn in March—before stabilising in the latter part of the year.

Top 10 States Account for 69%

Debt servicing obligations remain highly concentrated. The top 10 states accounted for 68.57 per cent of total foreign debt deductions in 2025.

Lagos led with N92.80bn, representing 20.38 per cent of the national total and a 28.33 per cent increase from 2024.

Rivers followed at N48.58bn, more than doubling its 2024 figure with a 110.02 per cent jump.

Kaduna ranked third at N47.93bn, up 5.13 per cent year-on-year.

Ogun posted one of the sharpest increases, rising 110.22 per cent to N25.20bn.

Cross River recorded N21.01bn, up 22.86 per cent.

Other major contributors included Oyo (N20.17bn), Edo (N18.70bn), Bauchi (N16.85bn), Kano (N10.63bn), and Ebonyi (N10.37bn), with Ebonyi posting a 53.09 per cent rise.

Regional Breakdown

By geopolitical zone, the South-West carried the heaviest burden at N162.77bn, accounting for 35.74 per cent of total foreign debt service, largely driven by Lagos and Ogun.

The South-South followed with N100.37bn (22.04 per cent), buoyed by Rivers, Edo, Cross River, and Delta.

The North-West recorded N81.97bn (18.00 per cent), with Kaduna and Kano as key contributors.

The North-East accounted for N42.42bn (9.32 per cent), while the South-East posted N40.20bn (8.83 per cent). The North-Central had the lowest at N27.65bn (6.07 per cent).

Sustainability Concerns Mount

The Nigeria Extractive Industries Transparency Initiative (NEITI) warned that several states with heavy debt burdens rank lower in FAAC allocations, raising red flags over fiscal sustainability.

Economists caution that without stronger internally generated revenue (IGR), rising debt service obligations could crowd out spending on salaries, infrastructure, and social services.

Teslim Shitta-Bey, Director and Chief Economist at Proshare Nigeria LLC, argued that borrowing should not be the default option. He advocated for longer-term debt instruments structured more like equity and called for the creation of a comprehensive national asset register to unlock value from dormant assets.

He also criticised the underutilisation of revenue bonds, urging states to prioritise them over general obligation bonds.

Similarly, macroeconomic analyst Dayo Adenubi emphasised the need to expand consumption to boost Value Added Tax receipts, strengthen property and transport-related tax enforcement, and reinforce the social contract to enhance compliance.

With debt service now absorbing a significant portion of subnational revenues, analysts say fiscal reforms and revenue diversification are becoming increasingly urgent for Nigeria’s states.

 

 

Source: Punch

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Business & Economy

Tinubu To Present 2027 Budget Before Year-End As FEC Approves Five-Year Development Plan

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President Bola Ahmed Tinubu
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President Bola Tinubu is expected to present the 2027 Appropriation Bill to the National Assembly before the end of 2026, as the Federal Executive Council (FEC) approved the National Development Plan 2026–2030 and new policy measures aimed at strengthening food security and tackling child stunting.

The Minister of State for Budget and Economic Planning, Doris Uzoka-Anite, disclosed this on Wednesday while briefing State House correspondents on the outcomes of the FEC meeting chaired by President Tinubu at the Presidential Villa, Abuja.

Uzoka-Anite also announced the council’s approval of the Revised National Policy on Food and Nutrition 2026, which seeks to establish sustainable financing mechanisms and strengthen collaboration among ministries responsible for agriculture, livestock, health and education, as well as development partners.

The announcements followed the conclusion of the 32nd Nigerian Economic Summit, held in Abuja from October 26 to 28, which focused on key issues affecting the country’s economic development.

Meanwhile, the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has clarified that the $21.7 billion borrowing proposal transmitted by President Tinubu to the National Assembly is intended to finance investments in productive assets and infrastructure rather than recurrent expenditure.

Oyedele explained that the proposal represents a multi-year investment programme spanning approximately five years, rather than an immediate drawdown of the entire amount.

According to him, $10.6 billion is earmarked for critical transportation infrastructure, including the Sokoto–Badagry Highway, Lagos–Calabar Coastal Highway and Kano–Kaduna Metro Rail.

He further disclosed that more than $7.9 billion would be sourced from multilateral and bilateral development partners, including $5 billion from the World Bank, at an average interest rate of approximately 2.1 per cent.

The proposed financing package also includes $3.3 billion for state government projects and $1.45 billion for projects in the Federal Capital Territory.

The planned 2027 budget presentation and the approval of the five-year development plan underscore the Federal Government’s efforts to align fiscal planning, infrastructure investment and social development priorities with its broader economic agenda.

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Tinubu Rules Out Fuel Subsidy Return, Says Nigeria Cannot Go Back to ‘Egypt’

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President Bola Ahmed Tinubu
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President Bola Tinubu has ruled out any return to petrol subsidy, insisting that the removal of the policy was necessary to prevent Nigeria’s economy from sliding into bankruptcy.

The President reiterated his position on Monday during a meeting with members of the City Boy Movement, a youth-driven political and advocacy group, where he defended the economic reforms introduced by his administration.

Tinubu said the government could no longer sustain the financial burden of subsidising petrol, arguing that the country lacked the resources required to continue funding the scheme.

“I came, and I removed the subsidy on my first day. Nigeria would have gone bankrupt; there was nothing left to pay for subsidies,” he said.

Using a biblical and Quranic analogy to underscore his position, the President declared that reversing the policy would amount to returning to an unsustainable economic system.

“When Moses (Musa) left Egypt, the Red Sea parted and gave way. You cannot ask Moses to go back to Egypt. With your energy and support, we will never go back to Egypt,” he stated.

The removal of petrol subsidy, announced during Tinubu’s inauguration on May 29, 2023, marked a major shift in Nigeria’s fiscal policy. The decision significantly increased petrol prices and contributed to mounting pressure on household incomes, transportation costs and businesses.

Petrol prices, which were below ₦200 per litre before the policy change, have since risen substantially, with prices reported at between ₦1,350 and ₦1,405 per litre across major filling stations.

The resulting increase in energy and transportation costs has continued to fuel public concerns over inflation, declining purchasing power and the overall cost of living.

However, the Federal Government has maintained that subsidy removal is critical to reducing fiscal pressure, improving public revenue and creating room for investment in infrastructure and other priority sectors.

Tinubu acknowledged the political contest surrounding the policy, noting that his opponents had promised to restore fuel subsidy. He nevertheless maintained that his administration would not reverse the reform.

Beyond defending the policy, the President urged members of the City Boy Movement to mobilise support for his administration by communicating its achievements and future plans to young Nigerians across campuses, markets and rural communities.

He also encouraged eligible young people to obtain their Permanent Voter Cards (PVCs) and participate in the electoral process.

The debate over fuel subsidy remains a central issue in Nigeria’s economic policy, with the government defending the reform on fiscal sustainability grounds while households and businesses continue to grapple with the effects of higher fuel prices.

 

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FG Rules Out Electricity Tariff Hike, Targets 24-Hour Power Supply

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The Federal Government has ruled out any plan to increase electricity tariffs, saying its priority is to improve power supply and ensure reliable electricity across the country.

The Minister of Power, Joseph Tegbe, gave the assurance in Ibadan, Oyo State, on Thursday, amid concerns and speculation about a possible increase in electricity tariffs.

Tegbe spoke during the groundbreaking ceremony for five interconnected mini-grid projects with a combined generation capacity of 17.7 megawatts and a 17.74-megawatt-hour Battery Energy Storage System (BESS).

“I want to say this clearly and without ambiguity: there is no plan to increase electricity tariffs. What we are planning is a power sector that works around the clock. Our commitment is 24/7 power,” the minister said.

He urged Nigerians to disregard reports suggesting an impending tariff hike, stressing that the government was focused on improving electricity generation, transmission and distribution.

The five mini-grid projects are located in Bola, Jiboye, Molade-Adelubi, Ogo Oluwa and Sooko-Elega. They are expected to provide electricity to communities across Akinyele, Ido, Ibadan North, Egbeda and Lagelu Local Government Areas of Oyo State.

According to the minister, the projects are designed to expand electricity access, reduce dependence on petrol and diesel-powered generators, and create a more favourable environment for businesses, investment and job creation.

Tegbe said the Federal Government was also implementing a broader energy strategy aimed at improving electricity supply through designated energy corridors, including the Lagos-Ogun, Abuja-Kaduna-Kano and Benin-Enugu-Port Harcourt corridors.

He added that efforts were underway to strengthen the national grid and upgrade generation and transmission infrastructure across the country’s eastern, western and central corridors.

The minister described the mini-grid initiative as part of President Bola Tinubu’s Renewed Hope Agenda, noting that similar electricity interventions had been implemented in communities across several states with support from the Rural Electrification Agency (REA).

He commended Tinubu for his leadership and acknowledged the contributions of the REA, project developer Paras Energy and Natural Resources Development Limited, the World Bank and the Ibadan Electricity Distribution Company.

Tegbe also recognised the Oyo State Government, traditional rulers and other stakeholders for their roles in facilitating the projects.

The initiative is expected to improve electricity reliability in the beneficiary communities, support local economic activities and reduce energy costs for households and businesses.

 

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