The combined budgets of Nigeria’s 36 states and the Federal Capital Territory, FCT, have increased by 47.5 per cent, rising from N27.22 trillion in 2025 to N40.14 trillion in 2026.
However, despite the increase in overall spending, the proportion of the budgets allocated to capital projects has dropped, raising concerns about the possible effects on infrastructure development and long-term economic growth.
An analysis of the 2026 budgets shows that capital expenditure accounts for 64.34 per cent of the combined N40.14 trillion budget, compared with 73.24 per cent in 2025.
In monetary terms, the states and FCT have set aside N25.83 trillion for capital projects in 2026, compared with N19.94 trillion allocated from the N27.22 trillion aggregate budget in 2025.
This means capital spending has increased in naira terms, but its share of total expenditure has fallen by almost nine percentage points.
The development indicates that a larger portion of state resources is going towards recurrent expenditure and other obligations, even as governments seek to expand infrastructure and stimulate economic activity.
Regional Differences
Spending patterns vary across the geopolitical zones.
The South-South, North-West and North-East increased the proportion of their budgets allocated to infrastructure, while the South-East, South-West and North-Central reduced their capital spending shares.
Analysts warned that the declining proportion of capital expenditure could affect the ability of states to attract investments, particularly foreign capital, if inadequate infrastructure weakens the business environment.
They stressed the importance of continued investment in roads, electricity, water, transportation and other critical infrastructure to improve productivity and make states more attractive to investors.
The increase in state budgets also comes amid growing fiscal pressure, including higher personnel costs, debt obligations and demands for public services.
Experts say state governments must strike a balance between recurrent commitments and investments in productive infrastructure that can support economic growth and generate future revenue.
Capital Spending by Region
The FCT increased its capital expenditure share from 72.3 per cent in 2025 to 76.19 per cent in 2026. Its total budget rose from N1.81 trillion to N2.29 trillion.
In the South-South, capital spending increased from 58 per cent of the region’s N5.26 trillion budget in 2025 to 70 per cent of its N8.08 trillion budget in 2026.
The North-West also increased its capital expenditure share from 64.24 per cent to 75.3 per cent. Its combined budget rose from N4.6 trillion in 2025 to N6.53 trillion in 2026.
The North-East raised its capital expenditure proportion from 58.34 per cent to 64.15 per cent, while its total budget increased from N3.35 trillion to N4.14 trillion.
However, the South-East reduced its capital spending share from 82.05 per cent in 2025 to 61 per cent in 2026, despite its combined budget increasing from N3.6 trillion to N5.73 trillion.
The South-West recorded a slight decline, with capital expenditure falling from 55.4 per cent to 55.03 per cent, while its combined budget increased from N6.7 trillion to N8.7 trillion.
The North-Central recorded a more significant reduction, with its capital budget share dropping from 72 per cent in 2025 to 59.04 per cent in 2026. Its combined budget rose from N3.93 trillion to N4.7 trillion.
Federal Budget Larger Than States’ Combined Budgets
The analysis also shows that the Federal Government’s 2026 budget is significantly larger than the combined budgets of the 36 states and the FCT.
President Bola Tinubu signed the N68.32 trillion 2026 Appropriation Act into law on April 17, 2026.
As a result, the Federal Government’s budget exceeds the combined state and FCT budgets by N28.32 trillion.
Analysts argue that state governments should allocate more resources to development because they are closer to the grassroots and can deliver infrastructure and services more directly to local communities.
Professor of International Economics, Jonathan Aremu, expressed concern about the decline in the share of capital spending at a time when Nigeria’s population and infrastructure needs are increasing.
He said capital projects are essential for supporting productive activities and warned that declining allocations could create a mismatch between infrastructure demand and government investment.
Aremu also raised concerns about poor budget monitoring, questioning whether states were fully implementing even the projects already captured in their budgets.
Former central banker and consultant economist, Chukwunonso Iheoma, said capital expenditure was necessary for providing infrastructure that could support industrial development.
He warned that excessive allocation to recurrent spending could leave states with inadequate infrastructure, making it difficult to attract foreign investment and potentially forcing existing investors to relocate.
Emerging markets analyst, Ike Ibeabuchi, attributed part of the shift to increased recurrent spending during pre-election periods.
He said governors often increase salaries, distribute goods and provide other forms of immediate assistance to voters instead of investing more heavily in long-term infrastructure.
However, Ibeabuchi noted that the current 64 per cent capital expenditure share remains relatively high compared with previous years.
He recalled that Nigeria once operated with a budget structure of about 30 per cent capital expenditure and 70 per cent recurrent spending, arguing that the country should work towards achieving about 70 per cent capital expenditure annually to accelerate development.
