13% derivation fund cuts oil states’ domestic debt by N611bn

Oil-producing states have reduced their domestic debt burden by about N610.84bn between June 2023 and March 2025, buoyed by record inflows from the 13 per cent derivation fund.

The analysis is based on the latest subnational debt data from the Debt Management Office (DMO), though figures for Q2 2025 are yet to be published. In June 2023, the combined domestic debt of the nine oil-producing states stood at N1.66tn, representing 28.6% of Nigeria’s total subnational debt of N5.82tn.

By March 2025, their collective obligations had dropped to N1.05tn, accounting for 27.2% of the total state-level debt of N3.87tn. Among the biggest movers was Delta State, which slashed its domestic debt from N465.40bn in June 2023 to N204.72bn in March 2025—a drop of over 55%.

Akwa Ibom also trimmed its debt by more than 40%, from N199.58bn to N118.21bn. Bayelsa cut its obligations from N134.50bn to N73.53bn, while Imo went from N220.83bn to N122.09bn.

Edo, Anambra, Abia, and Ondo all posted notable declines, with Ondo State achieving the sharpest proportional cut—reducing its debt from N74.03bn to just N11.76bn.

However, Rivers State bucked the trend, posting an increase in domestic debt. Its obligations jumped from N225.51bn in June 2023 to N364.39bn in March 2025—an expansion of over 60%—despite being one of the top beneficiaries of derivation allocations.

Budget implementation reports show the heavy toll of debt servicing on these states during the review period. Collectively, the nine oil-producing states generated N1.39tn as Internally Generated Revenue (IGR) between Q3 2023 and H1 2025.

Against this backdrop, the N610.84bn in domestic debt repayments over the same period equates to nearly 44% of their combined IGR. This means almost half of their internally generated earnings went to settling debts rather than funding new projects, a ratio likely to rise once Q2 2025 DMO data is released.

A deeper dive into the IGR figures shows Rivers State leading with N507.23bn, followed by Delta (N250.36bn), Akwa Ibom (N134.81bn), Edo (N132.51bn), and Bayelsa (N101.85bn). On the lower end were Ondo (N68.83bn), Abia (N69.87bn), Imo (N47.51bn), and Anambra (N73.04bn).