Lagos State, Nigeria’s commercial epicenter, expanded its internal revenue base in 2025 while ramping up capital spending to address severe infrastructure demands driven by rapid urbanization and a population approaching 30 million.
Internally generated revenue (IGR) surged to ₦1.7 trillion in 2025, up from ₦1.2 trillion in 2024, representing a 35% compound average growth rate over the last five years.
Furthermore, strong operating surpluses continue to underpin healthy operating cash flow with cash flows from operations covering 44% of gross debt in 2025.
Total recurrent income reached ₦2.5 trillion, supported by higher oil-related federal transfers and strong Value Added Tax (VAT) receipts. The subnational economy now contributes an estimated ₦63 trillion to Nigeria’s gross domestic product, reinforcing its status as the country’s primary hub for foreign direct and portfolio investments.
Debt Dynamics and FX Risk
Gross debt—including lease liabilities and guarantees—rose to ₦3.1 trillion in 2025 following ₦583.7 billion in new borrowings. Despite the expansion in obligations, key debt sustainability metrics showed structural improvement:
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Debt Coverage: Net debt to recurrent income moderated to 1.05x in 2025 from 1.24x in 2024, underpinned by the state’s substantial operating surplus.
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Cash Flow Coverage: Cash flow from operations covered 44% of gross debt, down marginally from 45% in 2024.
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Foreign Currency Exposure: Foreign-denominated debt accounted for 61% of total obligations in 2025, down from 67% in 2024. Recent exchange rate stabilization has helped mitigate currency mismatches, while access to long-dated, concessional financing limits immediate refinancing risks.
Capital Allocation and Credit Profile
Capital expenditure expanded to ₦1.6 trillion in 2025, up from ₦1.1 trillion in 2024, as the state accelerated investments in transit, logistics, and civic infrastructure. Recurrent expenditure growth also accelerated, driven by a 45% surge in overhead costs.
The state’s local currency bonds and sukuk—issued under its ₦500 billion and ₦1 trillion issuance programs—carry ratings equivalent to its senior unsecured long-term profile. Although the instruments benefit from a federal Irrevocable Standing Payment Order (ISPO) against monthly FAAC allocations, coverage remains below 1x, meaning debt servicing relies primarily on the state’s robust independent cash flows rather than federal guarantees.
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