No fewer than 10 Nigerian states are planning to raise about N4.287tn from loans, bonds, grants, capital receipts and public-private partnerships to fund capital projects in their 2026 budgets, deepening concerns over rising subnational debt.
The states — Lagos, Abia, Ogun, Enugu, Osun, Delta, Sokoto, Edo, Bayelsa and Gombe — have proposed combined budgets of N14.174tn, according to an analysis of appropriation bills reviewed by The PUNCH.
The review shows that the states are increasingly relying on non-recurring sources of funding beyond statutory allocations from the Federation Accounts Allocation Committee, VAT receipts and internally generated revenue (IGR), as they pursue large infrastructure and development plans.
Economists say the growing appetite for borrowing reflects weak fiscal discipline rather than insufficient revenue. They warn that poor budget implementation, revenue leakages and weak oversight are pushing governments toward loans that could burden future generations.
Lagos State, which has Nigeria’s largest subnational budget, proposed N4.237tn for 2026. While N3.12tn is expected from IGR and federal transfers, the state plans to raise N1.117tn, or 26.4 per cent, through loans and bonds to finance capital expenditure.
Former Vice-Chancellor of Crescent University, Prof Sheriffdeen Tella, said states should focus on living within their means.
“States were not originally meant to borrow because they are largely dependent on allocations from the federal government,” he said, adding that poor fiscal discipline at the federal level has filtered down to states.
Abia State’s N1.016tn budget highlights the strain on smaller economies. The state expects N607.2bn from federal inflows, leaving a N409bn gap to be filled through borrowing and other one-off sources. Despite this, Abia recorded a 57.2 per cent drop in domestic debt by March 2025, according to the Debt Management Office.
Ogun State’s N1.669tn budget projects N518.9bn — about 31.1 per cent — from loans and grants, while Enugu State plans to raise N329bn, or 20.3 per cent, of its N1.62tn budget from borrowing and capital receipts.
Assistant General Secretary of the Nigeria Labour Congress, Chris Onyeka, criticised Nigeria’s budgeting culture, saying, “Budgeting in Nigeria does not make any sense to some of us. It no longer makes sense at all.”
“When budget performance is at 30 per cent, what is the point?” he asked, warning that weak enforcement has stripped budgets of their authority as binding laws.
Osun, Delta, Sokoto and Edo states also plan to fund between 30 and 42 per cent of their budgets through loans and grants, while Gombe State is the most exposed, with 60.8 per cent of its N535.7bn budget expected from non-recurring sources.
Experts warn that heavy reliance on borrowing could backfire if funding delays occur or debt servicing costs rise.
“Relying heavily on loans and grants for capital projects exposes states to funding delays and increases debt servicing obligations,” said Dr Ayodeji Ebo of Afrinvest, urging states to strengthen local revenue bases to ensure long-term fiscal stability.
