Nigeria’s 36 states and the Federal Capital Territory (FCT) have significantly expanded their budgets for 2026, with combined spending rising by 47.5 per cent from N27.22tn in 2025 to N40.14tn. However, the bigger budgets have come with a notable shift in spending priorities, as the share allocated to capital projects has fallen, raising concerns about infrastructure development and the ability of states to support long-term economic growth.
The analysis of the 2026 budgets shows that states and the FCT allocated N25.83tn to capital expenditure, representing 64.34 per cent of their combined budgets. Although this is higher in naira terms than the N19.94tn allocated to capital projects in 2025, the proportion has dropped from 73.24 per cent. The decline means a larger portion of state resources is now going towards recurrent obligations, including salaries, personnel costs, debt servicing and public services, at a time when demand for infrastructure remains high.
Spending patterns, however, vary significantly across the country. The FCT increased its capital spending share to 76.19 per cent from 72.3 per cent, while the South-South raised its allocation from 58 per cent to 70 per cent. The North-West also increased its capital expenditure share from 64.24 per cent to 75.3 per cent, while the North-East moved from 58.34 per cent to 64.15 per cent. In contrast, the South-East recorded the sharpest decline, cutting its capital spending share from 82.05 per cent to 61 per cent despite its overall budget rising from N3.6tn to N5.73tn. The North-Central also reduced its capital allocation from 72 per cent to 59.04 per cent.
Economists have warned that the declining share of capital expenditure could weaken the ability of states to attract investment and deliver the infrastructure needed to support businesses. Professor of International Economics, Jonathan Aremu, said reducing capital spending while the population and demand for infrastructure are increasing creates a difficult development challenge. Economist Chukwunonso Iheoma similarly argued that inadequate infrastructure could make states less attractive to foreign investors, while emerging markets analyst Ike Ibeabuchi linked the trend partly to increased recurrent spending ahead of elections. He nevertheless noted that the current capital spending level remains considerably better than the pattern seen in previous years.
The development also comes as the Federal Government’s 2026 budget of N68.32tn remains significantly larger than the combined N40.14tn budgets of the 36 states and the FCT. With states responsible for delivering many services and infrastructure closer to citizens, analysts say governments must strike a better balance between recurrent commitments and productive investment. The central challenge, therefore, is not simply how much states budget, but how effectively those funds are implemented to build roads, power, water systems, transport networks and other infrastructure capable of creating jobs, attracting investment and generating sustainable revenue.
source: punch
