Ten Nigerian states plan to raise around N4.287 trillion from loans, bonds, grants, capital receipts, and public-private partnerships to fund capital projects in their 2026 budgets. The states—Lagos, Abia, Ogun, Enugu, Osun, Delta, Sokoto, Edo, Bayelsa, and Gombe—submitted combined budgets totaling N14.174 trillion to their respective legislatures.
An analysis by The PUNCH shows that these states are increasingly relying on non-recurring sources of finance beyond statutory federal allocations, such as FAAC disbursements, VAT revenue, and internally generated revenue (IGR), to implement large-scale infrastructure and development projects.
Economists argue that Nigeria’s growing dependence on borrowing stems not from revenue shortages but from poor public fund management. Budgets, which should serve as strict spending guides, are often disregarded, while weak oversight and revenue leakages force governments to borrow. Though borrowing can support development if used prudently, frequent and unchecked loans risk creating long-term debt burdens for future generations.
Highlights from Key States
Lagos State, the country’s commercial hub, proposed a N4.237 trillion budget for 2026. Of this, N3.12 trillion will come from IGR and federal transfers, leaving N1.117 trillion (26.4%) to be raised through loans and bonds for capital projects. Even with substantial revenue, borrowing remains central to funding the state’s ambitious infrastructure agenda.
Abia State, under Governor Alex Otti, faces a N1.016 trillion budget with N607.2 billion expected from FAAC, VAT, grants, and federal revenue, leaving a N409 billion funding gap (40.3%) to be met via borrowing. Despite these challenges, Abia has made strides in debt reduction, with domestic debt dropping by 57.2% in 2025.
Ogun State, with a N1.669 trillion “Budget of Sustainable Legacy”, expects N509.88 billion from IGR and N554.81 billion from federal transfers, leaving N518.9 billion (31.1%) to be raised through loans and grants. By mid-2025, Ogun’s external debt increased slightly, contributing to a national rise in state borrowings.
Enugu State plans a N1.62 trillion budget, a 66.5% increase over 2025. While N870 billion from IGR and N387 billion from federal allocations cover recurrent and some developmental expenses, N329 billion (20.3%) will be financed through loans and capital receipts. Enugu had the highest domestic debt in the South-East as of Q2 2025, at N180.5 billion.
Osun State’s N723.45 billion budget relies on N421.25 billion from recurrent revenue, with N286.01 billion (39.5%) from capital receipts. Debt reductions under Governor Ademola Adeleke include a decline in domestic debt from N148.37 billion in 2022 to N83.32 billion in 2025.
Delta State’s N1.664 trillion budget will use N250 billion in IGR and N720 billion in federal transfers, leaving N694 billion (41.7%) to come from loans and grants. Delta reduced domestic debt in 2025 by repaying rather than borrowing.
Bayelsa State, under Governor Douye Diri, plans N74.9 billion (7.4%) from loans and grants for its N1.01 trillion budget, maintaining one of the lowest debt profiles in the South-South region. Gombe State is the most dependent on borrowing, with 60.8% of its N535.7 billion budget expected from loans and capital receipts.
Edo State will cover 31.8% of its N939.85 billion budget via loans, grants, and public-private partnerships, while Sokoto State plans 30.8% from non-recurring funds in its N758.7 billion “Budget of Socio-Economic Expansion.”
Experts Weigh In
Prof. Sheriffdeen Tella of Crescent University said states must live within their means and focus on growing IGR. He noted that Nigeria’s fiscal challenges are largely due to revenue mismanagement rather than a lack of funds, adding that borrowing is often a consequence of systemic inefficiency.
Chris Onyeka, Assistant General Secretary of the Nigeria Labour Congress, criticised poor budget enforcement, arguing that frequent breaches of budgetary provisions erode public confidence and weaken fiscal discipline. He added that borrowing is justifiable only if properly applied to stimulate growth and infrastructure development.
Dr. Ayodeji Ebo, Managing Director of Optimus by Afrinvest, highlighted the risks of overreliance on loans and grants, noting that delayed funding and rising debt service obligations could jeopardise long-term fiscal sustainability. He urged states to prioritise durable local revenue sources.
Aliyu Ilias, a fiscal analyst, warned that states with low IGR are particularly vulnerable, with over one-third of their budgets often dependent on non-recurring funds, potentially undermining financial stability if external resources are delayed.
