The governors of 36 states sued the Federal High Court in Abuja to prohibit the deduction of $418 million in Paris Club return debt.
On Friday, Justice Inyang Ekwo ruled that the lawsuit was without substance.
The judge also ruled that the lawsuit, which was brought by the attorneys general of 36 states, was an abuse of court process since it was brought without the required locus standi.
The governors had requested the court to suspend the deduction of $418 million from their accounts through their lawyer, Sunday Ibrahim Ameh (SAN).
The court had previously turned down a plea for an injunction barring the federal government from making the deductions.
The governors argue that they were not parties to a lawsuit in which a judge ordered the withdrawal of $418 million from the Paris Club refunds for payments to contractors and consultants.