States, Local Councils Settle N547.5bn in Bank Loans.

Outstanding bank exposure rose marginally to N2.59tn in February 2025 before easing to N2.55tn in March. By April and May, the balance stabilised at around N2.44tn–N2.45tn, followed by a sharp drop to N2.13tn in June 2025 the largest single-month adjustment recorded during the year.
June marked the most pronounced year-on-year shift. Outstanding obligations declined from N2.68tn in June 2024 to N2.13tn a year later, representing a reduction of more than half a trillion naira. On a month-on-month basis, the fall from May’s N2.45tn to June’s N2.13tn amounted to approximately N313bn, pointing to an accelerated effort to reduce bank liabilities toward the end of the second quarter, amid elevated interest rates and stronger statutory revenue inflows.
Throughout 2024, the Central Bank of Nigeria’s Monetary Policy Committee maintained an aggressive tightening stance, raising the Monetary Policy Rate from 18.75 per cent at the beginning of the year to about 27.50 per cent by November, as part of efforts to curb inflation and stabilise the exchange rate. In 2025, the committee largely kept rates unchanged at 27.50 per cent for most of the year, reflecting a pause following the earlier tightening cycle as inflationary pressures began to ease. In September 2025, the MPC implemented its first rate cut in five years, reducing the benchmark to 27.00 per cent, a move sustained in November as policymakers sought to balance disinflation with financial stability.
High borrowing costs appear to have encouraged sub-national governments to scale back bank borrowing as statutory allocations improved. Records show a significant increase in the funds received by state governments and local government councils in 2025 compared with 2024, underscoring the scale of revenue gains flowing through the federation account.
States and local governments jointly received N12.67tn in 2025, up from N8.96tn in 2024, excluding the 13 per cent derivation fund. This represents a year-on-year increase of N3.71tn, or 41.4 per cent. Including derivation, total receipts rose from N10.31tn in 2024 to N14.28tn in 2025 an increase of N3.98tn, or 38.6 per cent. The derivation component alone increased from N1.35tn to N1.62tn over the same period.
State governments accounted for the largest absolute gains, with their allocations rising from N5.19tn in 2024 to N7.31tn in 2025, an increase of N2.13tn, or 41 per cent. Allocations to local government councils grew from N3.77tn to N5.35tn, a rise of N1.58tn, or 41.8 per cent.
The monthly distribution data reflect this shift. State allocations increased from N396.69bn in January 2024 to N498.50bn in January 2025, peaking at N727.17bn in October 2025 before closing the year at N601.73bn, well above the N549.79bn recorded in December 2024. Local government councils followed a similar trajectory, with allocations rising from N288.93bn in January 2024 to N361.75bn in January 2025, surpassing N500bn in the final quarter of 2025 and ending the year at N445.27bn, compared with N402.55bn a year earlier.
In 2024, monthly allocations to councils largely ranged between N267bn and N294bn, while state allocations hovered around N366bn to N403bn. By contrast, 2025 figures show that councils rarely received less than N387bn in any month, while state allocations seldom fell below N498bn. Overall, total allocations to all three tiers of government rose from N13.91tn in 2024 to N20.28tn in 2025, while total distributable revenue, including derivation, increased from N15.26tn to N21.89tn, with states and councils accounting for most of the growth.
The surge in statutory inflows appears to have contributed to the decline in bank debt among states and local governments. However, fiscal pressures persist for some sub-nationals, particularly those with high debt burdens and weaker revenue profiles, raising concerns about long-term sustainability and the capacity to fund critical development projects.
In response, debt management authorities have urged state governments to prioritise revenue mobilisation and explore alternative financing models, such as public-private partnerships, rather than relying heavily on borrowing. Such approaches are seen as a way to attract private capital, reduce fiscal strain, accelerate infrastructure delivery, and support broader economic growth.