How Nigeria's States Quietly Swapped Naira Debt for Dollar Debt

In June 2021, only 3 of Nigeria's 36 states and the FCT owed most of their debt in US dollars. By June 2026, 33 did.

That is the quiet story inside the Debt Management Office's (DMO) latest figures. Most coverage ranks states by what they owe at home, or by what they owe abroad. Put the two side by side and a different picture appears: Nigerian states have moved from being naira borrowers to dollar borrowers in five years.

Combined, the states and FCT owed ₦14.01 trillion at the end of June 2026. ₦9.42 trillion of it (67.2%) is owed in dollars. Five years ago the dollar share was 31.2%.

The states the headlines praise for having the smallest domestic debt are the most exposed. Jigawa, which has the lowest domestic debt in the country, owes 99.1% of its debt in dollars.

The three numbers that matter

1. States owing mostly in dollars: 3 → 33

In June 2021, only Kaduna, Edo and Lagos owed more than half their debt in dollars. Today 33 of the 37 governments do.

2. Dollar share of all state debt: 67.2%

Up from 31.2% in June 2021. States owe ₦9.42 trillion abroad and ₦4.59 trillion at home.

3. New foreign debt in one year: $2.02 billion

Between June 2021 and June 2025, state external debt rose by only $259 million in total. In the 12 months to June 2026, states added almost eight times that.

From one-third dollars to two-thirds dollars

The shift happened in two waves.

Wave 1 (June 2023 to June 2024): the naira fell. The rate the DMO uses to convert foreign debt went from about ₦460 to ₦1,470 per dollar. States' dollar loans barely changed, but their naira value tripled. The dollar share jumped from 36.6% to 62.8% in a year.

Wave 2 (June 2025 to June 2026): states borrowed in dollars. This time the naira got stronger, which should shrink dollar debt in naira terms. Instead, states added $2.02 billion of new foreign debt in 12 months.

The last two half-years are the two largest increases in the five-year series.

Where the extra ₦7.56 trillion came from

In naira terms, state external debt went from ₦1.87 trillion to ₦9.42 trillion in five years. Splitting that rise into its two causes:

• ₦4.41 trillion (58%) came from the exchange rate. The June 2021 stock of $4.55 billion, revalued from ₦410 to ₦1,379 per dollar.

• ₦3.15 trillion (42%) came from new borrowing. $2.28 billion of extra dollar debt, valued at the June 2026 rate.

Almost all of the new-borrowing part (₦2.79 trillion of the ₦3.15 trillion) was added in the last 12 months.

The naira debt that inflation erased

Measured in dollars, state domestic debt fell from $10.06 billion to $3.33 billion over the same five years, a 67% drop. States still owe roughly the same naira amount (₦4.12 trillion then, ₦4.59 trillion now), but devaluation and inflation shrank its real value.

Dollar debt cannot be inflated away like that. A naira loan gets lighter as prices rise; a dollar loan gets heavier every time the naira weakens.

State by State: 36 of 37 Moved Toward the Dollar

Every government except the FCT now owes a larger share of its debt in dollars than in 2021. Four patterns stand out.

1. The "debt cutters" are the most dollar-exposed

The five states with the lowest domestic debt are the five most dollar-dependent in the country (Kaduna, at 92%, is sixth).

These states did not stop borrowing. They changed currency. Paying off naira loans while taking development loans in dollars makes the domestic league table look good, but it leaves the state's total debt exposed to the exchange rate.

2. Lagos is the one big state going the other way

Lagos's dollar debt actually fell, from $1.38 billion in June 2021 to $1.27 billion in June 2026. Its dollar share rose only from 51.5% to 59.4%, and almost all of that came from the exchange rate. Only four of the 37 governments owe fewer dollars than five years ago: Lagos, Anambra, Bayelsa and the FCT.

3. The north is where the new dollar loans are going

The biggest shifts are in states that hardly borrowed abroad in 2021:

• Plateau: 9.2% in dollars in 2021, 76.6% in 2026

• Borno: 7.5% to 66.0% (external debt up from $16.7m to $102.5m)

• Kogi: 14.9% to 91.0% ($29.5m to $185.1m)

• Kano: 17.8% to 86.6% ($67.7m to $239.0m, of which $111m was added in the last six months alone)

• Jigawa: external debt nearly doubled in six months, from $45.7m to $83.2m

This matches the timing of World Bank programmes such as HOPE-Governance, a $500 million results-based programme for state education and primary healthcare that became effective in September 2025. In the DMO's June 2026 table, 91.8% of state external debt is owed to multilateral lenders.

4. The FCT and the oil states still borrow in naira

Only four governments owe less than half their debt in dollars: FCT (9.1%), Delta (27.2%), Rivers (41.2%) and Benue (46.6%). The FCT is the only government whose dollar share fell, because its naira debt quintupled in a year (₦71bn to ₦359bn) while its dollar debt stayed at about $26m.

Why It Matters: Every ₦100 Move Costs States ₦683 Billion

States earn in naira: FAAC allocations and their own internally generated revenue (IGR). Two-thirds of what they owe is now in dollars. That mismatch is the risk.

• Each ₦100 rise in the dollar rate adds ₦683 billion to state debt. Lagos alone takes ₦127 billion of that, Kaduna ₦74 billion.

• The strong naira is helping right now. The CBN rate was about ₦1,329/$ on October 2, 2026, below the ₦1,379 used for June. At that rate, state external debt is worth about ₦9.08 trillion, roughly ₦342 billion less than the June figure.

• A reversal would hurt. If the naira went back to its June 2025 level (about ₦1,529/$), state external debt would be worth about ₦10.45 trillion, ₦1.02 trillion more, without a single new loan.

It Is Not All Bad News

Almost all of this debt (91.8%) is owed to the World Bank, AfDB and other development lenders, with no Eurobonds. These loans usually carry low interest rates and long repayment periods, and many are tied to results in schools, clinics and public finances. Swapping expensive bank loans at home for cheaper development loans abroad can be a sensible trade.

The catch is that the savings on interest can disappear in one bad year for the naira. A state that owes 99% in dollars has no naira debt left to soften the shock.

Questions Residents Should Ask Their State

1. What is each new foreign loan paying for, and what results is it tied to?

2. How much of next year's budget goes to foreign debt service at today's rate, and at ₦200 weaker?

3. Does the state have any plan, or reserve, for a weaker naira?

Dollar Debt: The Numbers at a Glance

Final Takeaway

Nigeria's state debt story is usually told as a ranking of who owes the most at home. That ranking is now misleading. Two-thirds of state debt is in dollars, 33 of 37 governments owe mostly in dollars, and the states with the cleanest domestic records are the most exposed.

The next DMO state-by-state external debt release covers December 2026. The thing to watch is whether the pace of the last year (+$2.02 billion) continues, and what the naira does in the meantime.

Data source: Debt Management Office (DMO) and National Bureau of Statistics (NBS), Nigeria Public Debt Report, Q2 2021 to Q2 2026. Dollar share = external debt in naira ÷ (external + domestic debt in naira). Exchange rates are those implied by the DMO's naira and dollar totals (about ₦409.7/$ in June 2021 and ₦1,379.18/$ in June 2026). The DMO publishes state external debt only for June and December.