Thirty-one states of the federation are trapped in a domestic debt burden of N2.57tn while attracting no foreign capital inflow in the first quarter of 2025, according to findings by The PUNCH.

The latest figures from the National Bureau of Statistics and the Debt Management Office paint a worrying picture of limited investor confidence at the subnational level and a growing reliance on domestic borrowing and federal allocations to finance operations.

Within one year, 10 states increased their debt by N417.71bn, as other states paid off their loans. The NBS capital importation report shows that only a handful of states attracted measurable foreign investment in the first quarter of 2025.

In contrast to the 31 states that attracted no foreign capital, only five states and the Federal Capital Territory managed to pull in investment in the first quarter of 2025. Together, they secured $5.63bn in foreign capital inflows, up from $3.38bn in Q1 2024, while carrying a combined domestic debt stock of N1.30tn.

This represents 33.48 per cent of the total subnational domestic debt of N3.87tn, slightly down from 35.34 per cent a year earlier when their obligations stood at N1.44tn. The figures show an improvement in investor appetite for these jurisdictions, coupled with deliberate debt consolidation as their overall obligations declined by N142.35bn year-on-year.

The FCT Abuja emerged as the standout performer, cementing its position as the most attractive destination for foreign capital in Nigeria. Capital inflows into Abuja surged from $593.58m in Q1 2024 to $3.05bn in Q1 2025, more than a fivefold increase.

This surge coincided with a sharp cut in domestic debt, which fell from N94bn to N61.11bn, a reduction of N32.89bn or about 35 per cent. Lagos followed closely, attracting $2.56bn in Q1 2025 compared with $2.78bn in the same period of 2024.

Although inflows dipped slightly, the state’s ability to maintain such a high level of capital importation is noteworthy given global investor caution. Lagos also managed to lower its domestic debt from N929.41bn to N874.04bn, a decline of N55.37bn, though it remains by far the most indebted subnational entity, accounting for about 67.5 per cent of the total N1.30tn owed by the six entities that attracted foreign capital.

The other four states attracted modest amounts of capital but nonetheless achieved measurable fiscal improvements. Kaduna received $4.06m in foreign inflows and cut its debt by N4.37bn to N25.01bn, showing a cautious but positive step in external engagement.

Kano secured just $0.12m but still lowered its obligations by N6.68bn to N58.29bn, highlighting that even small inflows were complemented by disciplined domestic debt management.

Ogun pulled in $7.95m while reducing its debt by N31.08bn, ending at N190.14bn, making it the second-most indebted after Lagos within this group. Oyo, meanwhile, attracted $7.81m and trimmed its obligations by N11.95bn to N86.83bn.

The PUNCH observed that Abuja and Lagos together accounted for over 99 per cent of the $5.63bn foreign capital that entered the subnational space in Q1 2025, effectively crowding out the others. At the same time, Lagos alone carried nearly 68 per cent of the group’s domestic debt, reinforcing the state’s dominant but risky position in Nigeria’s fiscal balance.

The smaller inflows into Ogun, Oyo, Kaduna and Kano are symbolically important because they mark a shift from zero to some level of foreign investor interest, but in absolute terms they remain negligible. Analysis by The PUNCH further showed that the majority of states recorded no foreign inflow, shutting them out of fresh capital that could have provided liquidity and opportunities for growth.

At the same time, the DMO data confirm that the 31 states without any foreign capital inflows carried a domestic debt burden of N2.57tn as of March 2025, which represented 66.52 per cent of the country’s total subnational domestic debt stock of N3.87tn.

This was higher than the 64.66 per cent recorded in March 2024, when their collective debt stood at N2.63tn out of a total of N4.07tn. There was a small reduction of N56.67bn in total debt, which hides the sharper reality that while some states made progress in reducing their debt, others raised their obligations by wide margins.

However, while overall subnational debt declined year-on-year, the share borne by these states actually grew, highlighting their greater reliance on domestic borrowing.

Among the group, the top five debtors—Rivers with N364.39bn, Delta with N204.72bn, Enugu with N188.42bn, Imo with N122.09bn, and Cross River with N115.12bn—together accounted for about N994.7bn, nearly 39 per cent of the entire debt stock of the 31 states.

The PUNCH observed that Abia cut its debt by N65.04bn from N113.71bn to N48.67bn. Adamawa reduced by N24.90bn to N78.65bn, and Akwa Ibom lowered by N24.72bn to N118.21bn.

Anambra brought its stock down by N6.23bn to N28.19bn, while Bauchi went in the opposite direction with an increase of N34.01bn to N142.40bn. Bayelsa cut N29.70bn to end at N73.53bn, but Benue expanded by N13.09bn to N129.82bn. Borno reduced by N11.80bn to N25.09bn.

Cross River cut sharply by N41.05bn to N115.11bn, and Delta delivered the biggest reduction nationwide, slashing N130.17bn to stand at N204.72bn. Ebonyi cut by N5.11bn to N17.10bn, while Edo added N10.02bn to reach N82.39bn.

Ekiti trimmed N6.46bn to N51.43bn while Enugu made a dramatic jump of N105.95bn, pushing its debt to N188.42bn. Gombe increased by N12.85bn to N83.66bn, while Imo reduced by N40.97bn to N122.09bn. Jigawa, one of the least indebted, cut N1.01bn to settle at N1.06bn.

Katsina lowered its burden by N14.80bn to N23.26bn, and Kebbi cut N1.96bn to N15.09bn. Kogi reduced by N18.16bn to N20.39bn. Kwara nudged upward slightly, adding N1.03bn to N60.10bn, while Nasarawa also added N968m to stand at N24.72bn.

Niger raised its debt significantly, increasing by N57.68bn to N143.75bn. Ondo cut by N4.63bn to N11.76bn, Osun reduced by N3.70bn to N83.32bn and Plateau cut by N23.97bn to N83.39bn.

Rivers took the biggest leap among all states, adding N131.82bn to its domestic debt to reach N364.39bn, ranking second only to Lagos. Sokoto trimmed N2.45bn to N52.67bn, but Taraba joined the heavy borrowers with an increase of N50.29bn to N82.93bn.

Yobe reduced by N9.99bn to N39.62bn, while Zamfara cut N7.53bn to N57.71bn. The PUNCH observed that 21 states reduced their debts, with Delta, Abia, Imo, Cross River and Bayelsa making the most notable cuts.

Yet these reductions were overshadowed by 10 states that increased their obligations by N417.71bn in one year. Rivers, Enugu, Niger and Taraba accounted for the bulk of the new loans, showing that while some states are attempting fiscal restraint, others are ramping up borrowings at a scale that could prove costly.

The Director-General of the DMO, Ms Patience Oniha, earlier called on state governments to adopt Public-Private Partnerships and prioritise tax revenue generation over borrowing to fund infrastructure projects.

She made these remarks during a one-day workshop in Lagos, organised under the States Action on Business Enabling Reforms Programme with World Bank support. Oniha emphasised that PPPs can drive Nigeria’s economic growth by leveraging private sector investment and expertise for infrastructure development and public service delivery.

This approach, she noted, reduces fiscal strain on governments, ensures faster project completion, and delivers higher-quality outcomes while creating jobs and spurring innovation. Oniha said, “Borrowing should not be the major way to source funds. You must increase your revenues by increasing your tax revenues.

“Public-private partnerships can help improve Nigeria’s economy by attracting private sector investment and expertise to develop infrastructure and deliver public services. This reduces the financial burden on government, accelerates project delivery, and often results in higher quality outcomes. PPPs can also create jobs, stimulate local businesses, and foster innovation.”

Emphasising how critical tax revenue was to the state governments, the DG said it would boost their fiscal health, thereby reducing pressure on them. According to her, “Efficient tax collection increases government revenue without raising tax rates, ensuring more funds are available for public investment in health, education, and infrastructure.

“Improved compliance and administration reduce leakages and corruption, making the tax system fairer and more predictable. Together, PPPs and efficient tax collection boost economic growth, enhance public services, and support sustainable development. So revenues are absolutely important. It is important to keep surviving. You must raise revenues.”

The Nigeria Governors’ Forum recently said Investopedia would unlock capital, generate employment, accelerate infrastructure development, and drive economic growth across the country.

At the launch of the Forum’s Investopedia in Abuja, NGF Chairman and Kwara State Governor, AbdulRahman AbdulRazaq, emphasised the need for Nigeria to harness both global and African capital financing opportunities. AbdulRazaq explained that the NGF Investopedia was specifically designed to achieve these goals, adding that its core mission is to promote inclusive growth while positioning Nigeria as an attractive destination for investors.

However, an ECOWAS Common Investment Market consultant, Professor Jonathan Aremu, highlighted that most states don’t have attractive factors.

“The factors that attract foreign investment are not available in those states. One thing about investment is that it is crisis shy. Investment doesn’t go to places where there are crises. Because investors want stability and predictability in their investments, particularly having returns on their investments, he added.

A macroeconomic analyst, Dayo Adenubi, emphasised the need for states to take more targeted steps toward boosting internally generated revenue as they grapple with rising debt obligations and constrained federal transfers.