Thirty-one Nigerian states are trapped in a combined domestic debt of N2.57 trillion while failing to attract any foreign investment in the first quarter of 2025, according to fresh figures from the National Bureau of Statistics (NBS) and Debt Management Office (DMO).
The findings highlight a growing fiscal imbalance at the subnational level, with many states leaning heavily on domestic borrowing and federal allocations to survive, while struggling to convince foreign investors of their viability.
Abuja and Lagos Dominate Capital Inflows
Only five states and the FCT attracted foreign capital inflows in Q1 2025, securing a total of $5.63bn, a significant rise from $3.38bn in the same period of 2024.
- FCT Abuja led the pack with $3.05bn, up from $593.58m the previous year, while also cutting domestic debt by 35 per cent to N61.11bn.
- Lagos followed with $2.56bn, slightly lower than $2.78bn in 2024, yet still the largest state economy. Lagos reduced its debt to N874.04bn but remains Nigeria’s most indebted state, carrying nearly 68 per cent of the group’s obligations.
- Kaduna, Kano, Ogun, and Oyo attracted modest inflows of less than $10m each, alongside small debt reductions.
Together, Abuja and Lagos accounted for over 99 per cent of all foreign capital inflows into subnational entities, underscoring a sharp imbalance in Nigeria’s investment map.
Heavy Domestic Debt Burden
The 31 states with zero foreign investment held 66.5 per cent of Nigeria’s total subnational domestic debt. Within this group:
- Rivers (N364.39bn) recorded the biggest increase, adding N131.82bn within a year.
- Delta (N204.72bn) cut the most, reducing debt by N130.17bn.
- Enugu (N188.42bn), Imo (N122.09bn), and Cross River (N115.12bn) joined Rivers and Delta as the top five debtors.
While 21 states reduced their debts, 10 states increased theirs by N417.71bn, erasing much of the fiscal gains. Notably, Abia reduced its burden by N65.04bn, Bayelsa by N29.7bn, and Imo by N40.97bn, showing mixed performance across regions.
Experts Call for New Strategy
The Director-General of the DMO, Patience Oniha, urged state governments to shift away from borrowing and embrace Public-Private Partnerships (PPPs), alongside aggressive tax revenue reforms. She argued that PPPs could fast-track infrastructure, reduce fiscal pressure, and create jobs.
“Borrowing should not be the major way to source funds. You must increase your revenues by increasing your tax revenues,” Oniha said.
Similarly, economists have warned that most states fail to attract investors due to weak infrastructure, policy inconsistency, and insecurity. Professor Jonathan Aremu, an ECOWAS investment consultant, stressed that “investment is crisis shy,” and would only flow into states offering stability and predictable returns.
Analysts also advised states to deepen internally generated revenue (IGR), noting that overreliance on federal transfers leaves them vulnerable to shocks in oil prices and national revenue shortfalls.
Outlook
The contrast between a handful of investment-attracting states and the majority weighed down by debt underscores Nigeria’s uneven economic landscape. While Lagos and Abuja continue to dominate capital inflows, most states remain locked in debt dependency, raising concerns about sustainability ahead of the 2027 general elections.
