By Benson Daniel
The combined budgets of Nigeria’s 36 states and the Federal Capital Territory have increased by 47.5 per cent to N40.14 trillion in 2026, up from N27.22 trillion recorded in 2025.
Despite the substantial increase in overall spending, the proportion of the budgets allocated to capital projects has declined, raising concerns about the capacity of the increased spending to translate into stronger 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 budget, compared with 73.24 per cent in 2025. In nominal terms, however, capital spending increased to N25.83 trillion from N19.94 trillion in the previous year.
The figures indicate that states are allocating more money to capital projects in absolute terms, but the growth in total budgets has outpaced the increase in capital expenditure.
The decline in the capital spending ratio means a larger proportion of state budgets is being directed towards recurrent obligations and other expenditures. This could have implications for the pace of infrastructure development if the trend persists.
Regional variations were also evident in the 2026 budget allocations. The South South recorded a significant increase in its capital spending ratio, with capital expenditure accounting for about 70 per cent of its combined N8.08 trillion budget, compared with 58 per cent of N5.26 trillion in 2025.
The Federal Capital Territory also increased its capital expenditure ratio to 76.19 per cent from 72.3 per cent. Its total budget rose from N1.81 trillion in 2025 to N2.29 trillion in 2026.
However, the South East recorded one of the sharpest declines in the proportion of its budget allocated to capital projects. Capital expenditure fell to 61 per cent from 82.05 per cent, even as the region’s combined budget increased from N3.6 trillion to N5.73 trillion.
The South West also recorded a marginal decline, with capital spending accounting for 55.03 per cent of its N8.7 trillion combined budget, compared with 55.4 per cent of N6.7 trillion in 2025.
The increased budgets come against the backdrop of stronger revenues available to the three tiers of government. Federation Account allocations have risen substantially in 2026, providing states with additional resources to finance their budgets.
The Federation Account Allocation Committee recently distributed a record N3.007 trillion to the Federal Government, states
The revenue increase has created an opportunity for state governments to strengthen infrastructure, improve public services and invest in productive sectors. However, fiscal experts have continued to emphasise the need for governments to convert higher revenues into sustainable economic assets rather than allowing increased resources to translate mainly into recurrent expenditure.
The Federal Government’s 2026 budget of N68.32 trillion also remains significantly larger than the combined budgets of the 36 states and the FCT.
For state governments, the challenge will therefore be to ensure that higher budgetary provisions result in measurable improvements in roads, healthcare, education, water supply, electricity infrastructure and other areas that directly affect economic productivity and living standards.
The decline in the capital expenditure share has consequently placed greater attention on how states are managing the additional revenue available to them.
With stronger allocations expected to continue supporting state finances, governments will need to balance immediate recurrent obligations with investments capable of generating economic activity, creating jobs and expanding their future revenue bases.
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