Nigeria’s 36 states and the Federal Capital Territory have increased their combined budgets by 47.5 per cent, from N27.22tn in 2025 to N40.14tn in 2026.

Despite the significant increase in overall spending, the proportion allocated to capital projects has declined, raising concerns about the potential impact on infrastructure development and long-term economic growth.

An analysis of the 2026 budgets of the 36 states and the FCT shows that capital expenditure accounts for 64.34 per cent of the total budget, down from 73.24 per cent recorded in 2025.

In nominal terms, states and the FCT have allocated N25.83tn to capital expenditure out of their N40.14tn combined budget for 2026. This compares with N19.94tn earmarked for capital projects from the N27.22tn aggregate budget in 2025.

The figures indicate that although capital spending has increased in naira terms, its share of total state spending has fallen by nearly nine percentage points.

The shift suggests that more state resources are being channelled towards recurrent expenditure and other spending obligations in 2026, even as states seek to expand infrastructure and stimulate economic activity.

However, spending patterns differ across the geopolitical zones, with states in the South-South, North-West and North-East recording increases in infrastructure allocations. On the other hand, South-East, South-West and North-Central cut their capital budgets this year.

Analysts say the declining share of capital expenditure could have implications for states’ ability to attract investment, particularly foreign capital, if reduced infrastructure spending weakens the business environment.

They argue that sustained investment in roads, power, water, transport and other critical infrastructure remains important for improving productivity and making states more attractive to investors.

The increase in aggregate state budgets also comes amid rising fiscal pressures, with state governments facing growing personnel costs, debt obligations and demands for public services.

Experts point out that the challenge for state governments would be to balance these recurrent commitments with sufficient investment in productive infrastructure capable of supporting economic growth and generating future revenue.

Based on the analyses of these budgets, the FCT raised its capital expenditure to 76.19 per cent in 2026 from 72.3 per cent last year. Its nominal budget rose from N1.81tn in 2025 to N2.29tn in 2026.

Similarly, the South-South region raised its capital expenditure from 58 per cent of the total N5.26tn in 2025 to 70 per cent of the overall budget of N8.08tn.

Another region that raised its spending on capital projects is the North-West, which increased it from 64.24 per cent in 2025 to 75.3 per cent. The region’s total budget rose from N4.6tn in 2025 to N6.53tn in 2026.

The North-East also increased its capital expenditure in 2026 from 58.34 per cent to 64.15 per cent within the period. In nominal terms, the region’s budget climbed to N4.14tn in 2026 from N3.35tn last year.

However, three other regions decreased their capital expenditure this year. Leading the pack is the South-East, which cut its capital spending to 61 per cent in 2026 from 82.05 per cent in 2025. This is despite the region’s budget rising from N3.6tn in 2025 to N5.73tn in 2026.

Similarly, the South-West cut its capital spending marginally to 55.03 per cent in 2026 from 55.4 per cent in 2025. The region’s budget rose from N6.7tn in 2025 to N8.7tn in 2026.

Also, the North-Central slashed its capital budget significantly from 72 per cent in 2025 to 59.04 per cent in 2026. The region’s combined budget rose from N3.93tn to N4.7tn in 2026.

One significant observation in this analysis is that the Federal Government budget far outweighs the combined budgets of 36 states and the FCT.

President Bola Tinubu signed Nigeria’s N68.32tn 2026 Appropriation Act into law on 17th April 2026.

This means the combined budgets of 36 states and the FCT are lower than the Federal Government’s budget by N28.32tn in 2026.

Analysts argue that states ought to commit more budgets than the centre in order to ensure that development gets to the grassroots faster.

Professor of International Economics, Jonathan Aremu, said it was unfortunate that capital spending was declining in states when the population was rising, noting that it was impossible to have even development when this situation continued.

“Capital projects are meant to support productive activities. When money meant for capital projects is going down, it becomes a paradox, especially because the demand for infrastructure is rising,” he said.

The economist stressed that even though attention is often paid to the amount voted each year, budget monitoring has remained critically poor.

“Are they implementing even the ones they have budgeted? If the states are not increasing their budgets, how then will there be development across the regions?” he asked.

A former central banker and current consultant economist, Chukwunonso Iheoma, said capital budgets are meant for critical infrastructure that will boost industrial development.

“If a state earmarks more money for recurrent expenditure, it may be infrastructurally deficient. It cannot attract foreign investment, and existing investors may be forced to exit to another state where they will have access to the infrastructure.”

An emerging markets analyst, Ike Ibeabuchi, however, attributed the situation to increased recurrent pre-election spending.

“Most governors often like to increase salaries, distribute items to the people and share gifts in pre-election years. It is quite common among them. Rather than build more roads, they would share bags of rice and beans. It is the way politicians think,” he argued.

He, however, pointed out that 64 per cent of the budget is still significantly high.

“We started this campaign to raise capital projects in 1999. I remember when it used to be 30 per cent capital budget, 70 per cent recurrent. But the situation is much better now. All we are saying is that we need to get to 70 per cent capital expenditure every year. That is one way we can make progress in Nigeria fast.”