NO fewer than 10 Nigerian states are planning to raise about ₦4.287 trillion from loans, bonds, grants, capital receipts, and public-private partnerships to finance capital projects contained in their 2026 budgets, underscoring growing fiscal pressure at the subnational level.
News Point Nigeria reports that the states; Lagos, Abia, Ogun, Enugu, Osun, Delta, Sokoto, Edo, Bayelsa, and Gombe have jointly presented ₦14.174 trillion in proposed spending to their respective Houses of Assembly, according to an analysis of budget documents.
Findings show that despite continued reliance on statutory allocations from the Federation Accounts Allocation Committee (FAAC), value-added tax receipts, and internally generated revenue (IGR), many states are increasingly turning to non-recurring funding sources to sustain ambitious infrastructure and development plans.
Lagos State, Nigeria’s commercial hub and owner of the largest subnational budget, proposed a ₦4.237 trillion spending plan for 2026. While the state expects to generate ₦3.12 trillion from IGR and federal transfers, it plans to raise ₦1.117 trillion, representing 26.4 per cent, through loans and bonds to fund capital projects.
Even with IGR levels comparable to some smaller African economies, borrowing remains central to Lagos’ development strategy, particularly for large-scale transport, housing, and infrastructure projects.
Former Vice-Chancellor of Crescent University, Prof. Sheriffdeen Tella, cautioned that states should prioritise fiscal discipline and revenue optimisation rather than excessive borrowing.
“States were not originally meant to borrow because they are largely dependent on federal allocations,” he said, adding that the Federal Government’s own heavy borrowing has weakened its moral authority to restrain states.
According to Tella, Nigeria’s fiscal challenge is not revenue scarcity but poor management and leakage.
“As far as I am concerned, revenue is not Nigeria’s problem. The problem is the stealing of the revenue,” he stated.
Abia State’s ₦1.016 trillion budget highlights the dilemma faced by less commercially vibrant states. The government expects ₦607.2 billion from FAAC, VAT, grants, and other revenues, leaving a ₦409 billion gap, 40.3 per cent of the budget to be filled through borrowing and capital receipts.
Despite this, Abia recorded one of the most significant domestic debt reductions in 2025, cutting its debt stock by 57.2 per cent to ₦48.6 billion, according to the Debt Management Office (DMO).
Ogun State’s ₦1.669 trillion “Budget of Sustainable Legacy” projects ₦509.88 billion from IGR and ₦554.81 billion from federal transfers, but still requires ₦518.9 billion , 31.1 per cent from loans and grants. Ogun accounted for $21.8 million of Nigeria’s increase in state external debt in the first half of 2025.
Enugu State’s proposed ₦1.62 trillion budget represents a 66.5 per cent increase over 2025. The state plans to source ₦329 billion , 20.3 per cent from loans and capital receipts, despite already having the highest domestic debt stock in the South-East at ₦180.5 billion.
Osun State’s ₦723.45 billion budget relies on ₦286.01 billion nearly 40 per cent from capital receipts. The state, however, recorded notable debt reductions under Governor Ademola Adeleke, cutting domestic debt by 43.8 per cent since 2022.
Delta State’s ₦1.664 trillion budget still leaves a ₦694 billion gap to be filled by loans and grants despite projected IGR growth to ₦250 billion and ₦720 billion in federal transfers.
Assistant General Secretary of the Nigeria Labour Congress (NLC), Chris Onyeka, criticised Nigeria’s budgeting culture, describing it as ineffective due to poor implementation.
“When budget performance is at 30 per cent, what is the point?” he asked, noting that extra-budgetary spending has become routine while violations go largely unpunished.
Onyeka said borrowing itself is not illegal but stressed that debt must be used productively.
“Accountability is selective. Laws are enforced against workers but ignored when officials violate budget provisions,” he said.
Among the states, Gombe is the most dependent on borrowing, with ₦325.5 billion, 60.8 per cent of its ₦535.7 billion “Budget of Consolidation” expected from loans and capital receipts.
In contrast, Bayelsa State plans to source only ₦74.9 billion, 7.4 per cent of its ₦1.01 trillion budget from loans and grants, maintaining one of the lowest domestic debt profiles in the country.
Fiscal experts have warned that heavy reliance on non-recurring funds could threaten long-term sustainability.
Economist Aliyu Ilias noted that states with weak IGR are particularly exposed if borrowing plans fail to materialise.
Similarly, Dr. Ayodeji Ebo, Managing Director of Optimus by Afrinvest, cautioned that excessive borrowing raises debt-servicing burdens and exposes states to funding delays.
“For long-term sustainability, states must focus on building durable local revenue sources rather than depending excessively on external inflows,” he said.