Story Written By Okafor Joseph August 26,2025

Oil-producing states in Nigeria have reduced their domestic debts by about N610.84bn between June 2023 and March 2025, following record inflows from the 13% derivation fund.

Fresh data from the Debt Management Office (DMO) shows that the combined debt profile of the nine oil-producing states dropped from N1.66tn in June 2023 to N1.05tn by March 2025. Their share of the nation’s total subnational debt also declined from 28.6% to 27.2% within the period.

State-by-State Breakdown

• Delta State led the pack, slashing its debt by more than half from N465.4bn to N204.7bn.
• Akwa Ibom reduced its debt from N199.6bn to N118.2bn.
• Bayelsa cut down from N134.5bn to N73.5bn.
• Imo recorded a drop from N220.8bn to N122.1bn.
• Ondo posted the sharpest proportional decline, shrinking from N74bn to just N11.8bn.

However, Rivers State was the outlier, with its debt rising more than 60%—from N225.5bn to N364.4bn—despite receiving one of the largest shares of derivation payments.

Revenue and Repayments

The nine oil states generated N1.39tn in internally generated revenue (IGR) between Q3 2023 and H1 2025. However, about 44% of this revenue was used to service debts.

• Rivers reported the highest IGR at N507.2bn,
• Delta followed with N250.4bn,
• Akwa Ibom came third with N134.8bn.

Derivation Windfall

Data from the National Bureau of Statistics (NBS) further reveals that the states received N1.67tn in derivation funds between July 2023 and June 2025. Remarkably, N688bn (over 40% of the total) was paid in just the first half of 2025, nearly double the preceding six months.

The top four beneficiaries were:

• Delta – N520.3bn
• Bayelsa – N332.1bn
• Akwa Ibom – N330.3bn
• Rivers – N309.8bn

These four states accounted for nearly 90% of the allocations, while the remaining five producers shared just N140bn.

Outlook

Analysts note that while the derivation windfall has significantly improved debt sustainability in most oil-producing states, the situation in Rivers raises concerns about fiscal discipline. With oil revenues fluctuating and debt servicing consuming a large portion of IGR, experts say prudent management of derivation funds remains crucial to long-term stability.