Ten states are planning to source about ₦4.287 trillion from loans, bonds, grants, capital receipts, and public-private partnerships to finance capital projects in their 2026 budgets. Collectively, the states, including Lagos, Abia, Ogun, Enugu, Osun, Delta, Sokoto, Edo, Bayelsa, and Gombe, presented budgets totalling ₦14.174 trillion to lawmakers.
An analysis of these budgets shows that these states are increasingly turning to non-recurring financing beyond statutory federal transfers, including allocations from the Federation Accounts Allocation Committee, value-added tax receipts, and internally generated revenue, to support ambitious infrastructure and development projects.
Economists say Nigeria’s growing reliance on borrowing is not mainly because the country lacks revenue but because public funds are poorly managed. They argue that budgets, which should strictly guide government spending, are often ignored, while weak oversight and revenue leakages force governments to rely on loans. Although borrowing can help fund development when used carefully, frequent and unchecked borrowing risks creating long-term debt problems and passing today’s failures onto future generations.
In Lagos State, the commercial hub with the nation’s largest subnational budget, Governor Babajide Sanwo-Olu proposed a ₦4.237 trillion budget for 2026. Of this, ₦3.12 trillion will come from IGR and federal transfers, leaving ₦1.117 trillion (26.4 per cent) to be raised through loans and bonds to finance capital projects. Even for a state with IGR comparable to some smaller African countries, borrowing remains a key mechanism to fund ambitious infrastructure and development initiatives.
Abia State’s ₦1.016 trillion budget illustrates the challenges facing smaller, less commercially driven states. Under Governor Alex Otti, who is spearheading a revival of years of neglected infrastructure, the state expects to generate ₦607.2 billion from FAAC allocations, value-added tax, grants, and other federal revenue channels. This leaves a funding gap of ₦409 billion, or 40.3 per cent, which the government plans to cover through borrowing and other non-recurring sources.
Abia made verifiable progress in 2025, emerging as one of the leading states for domestic debt reduction. As of March 31, 2025, Abia’s domestic debt stood at ₦48.67 billion, marking a 57.2 per cent decline from the previous year. By Q2 2025, the figure was reported at ₦48.6 billion, the Debt Management Office recorded.
Governor Dapo Abiodun’s Ogun State ₦1.669 trillion “Budget of Sustainable Legacy” anticipates ₦509.88 billion from internally generated revenue and ₦554.81 billion from federal transfers, but loans and grants of ₦518.9 billion (31.1 per cent) will be required to fund its capital projects.
In the first half of 2025, total state external debt in Nigeria rose slightly to $4.812 billion, with Ogun State accounting for $21.8 million of the increase.
Enugu State plans a ₦1.62 trillion budget for 2026, a 66.5 per cent increase over 2025. While ₦870 billion from IGR and ₦387 billion from federal allocations will cover recurrent expenditure and some developmental spending, ₦329 billion (20.3 per cent) will come from loans and capital receipts.
The DMO reported that in Q2 2025, Enugu State had the highest domestic debt in the South-East, with a stock of ₦180.5 billion, more than 10 times that of Ebonyi, the region’s least indebted state, which stood at ₦15.8 billion.
Further, Osun State’s ₦723.45 billion budget relies on ₦421.25 billion in recurrent revenue, with ₦286.01 billion (39.5 per cent) from capital receipts to fund its projects. The state significantly reduced its debt profile in 2025 under Governor Ademola Adeleke. External debt fell from $91.78 million to $75.14 million, a decline of 18.13 per cent, while domestic debt dropped from ₦148.37 billion in 2022 to ₦83.32 billion in 2025, a reduction of ₦65 billion, or 43.84 per cent.
In Delta State, expected growth in internally generated revenue, projected at ₦250 billion, combined with ₦720 billion in federal transfers, still leaves ₦694 billion (41.7 per cent) from loans and grants to fund capital expenditure in its ₦1.664 trillion budget. Sokoto State’s ₦758.7 billion “Budget of Socio-Economic Expansion” will see ₦233.8 billion (30.8 per cent) sourced from grants, aid, and capital development funds, while Edo State will cover ₦299 billion (31.8 per cent) of its ₦939.85 billion budget through loans, grants, and public-private partnerships.
Bayelsa State, another oil-dependent economy, plans ₦74.9bn (7.4 per cent) of its ₦1.01 trillion budget from loans and grants, while Gombe State’s ₦535.7 billion “Budget of Consolidation” is the most dependent, with ₦325.5 billion (60.8 per cent) expected from loans and capital receipts.
Under Governor Sheriff Oborevwori, Delta State reduced its domestic debt in 2025 through repayments rather than new borrowings. Domestic debt stood at ₦204.67 billion as of June 30, 2025, down slightly from ₦204.72 billion in March, with a Q2 reduction of ₦93.92 billion noted in analyses. Although the state remains among the more heavily indebted, the decline reflects a measure of fiscal caution amid national trends.
Bayelsa State maintained one of the lowest domestic debt profiles among Nigerian states as of mid-2025 under Governor Douye Diri. Domestic debt fell to ₦65.99 billion by June 30, 2025, down from ₦73.53 billion in March, reflecting a ₦7.54 billion reduction in Q2. The state remains the least indebted in the South-South region.
The PUNCH
