10 States Plan ₦4.3 Trillion Borrowing to Fund 2026 Budgets
No fewer than 10 Nigerian states are planning to source a combined ₦4.287 trillion from loans, bonds, grants, capital receipts, and public-private partnerships to finance capital projects in their 2026 budgets. The states — Lagos, Abia, Ogun, Enugu, Osun, Delta, Sokoto, Edo, Bayelsa, and Gombe — have jointly presented budgets totalling ₦14.174 trillion to their respective Houses of Assembly, signalling a growing dependence on borrowing and other non-recurring revenue sources to fund development plans.
An analysis of the proposed budgets shows that the states are increasingly relying on financing options outside statutory allocations from the Federation Accounts Allocation Committee (FAAC), value-added tax receipts, and internally generated revenue (IGR). While state governments argue that borrowing is necessary to bridge infrastructure gaps and stimulate economic growth, economists and labour leaders warn that the trend reflects deeper structural problems in public finance management.
According to fiscal experts, Nigeria’s growing dependence on borrowing at both federal and state levels is not primarily due to inadequate revenue but rather poor fiscal discipline, weak oversight, and widespread revenue leakages. They argue that budgets, which are meant to serve as binding legal frameworks for government spending, are frequently violated, forcing governments to rely on loans to cover shortfalls.
Lagos State, which has the largest subnational budget in the country, plans a ₦4.237 trillion budget for 2026 under Governor Babajide Sanwo-Olu. Of this amount, ₦3.12 trillion is expected from IGR and federal transfers, leaving a funding gap of ₦1.117 trillion, or 26.4 per cent, to be raised through loans and bonds. Despite having an IGR base comparable to some smaller African economies, Lagos continues to rely heavily on borrowing to finance its ambitious infrastructure agenda.
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Abia State’s proposed ₦1.016 trillion budget highlights the challenges faced by smaller states with limited commercial activity. The state expects ₦607.2 billion from FAAC, VAT, grants, and other federal revenue sources, leaving a gap of ₦409 billion, or 40.3 per cent, to be covered through borrowing and other non-recurring income. Notably, Abia made significant progress in reducing its domestic debt in 2025, with figures from the Debt Management Office showing a 57.2 per cent year-on-year decline to ₦48.67 billion as of March 31, 2025.
Ogun State’s ₦1.669 trillion “Budget of Sustainable Legacy” also reflects heavy reliance on borrowing. While the state projects ₦509.88 billion from IGR and ₦554.81 billion from federal transfers, it plans to raise ₦518.9 billion, or 31.1 per cent of its budget, from loans and grants. In the first half of 2025, Nigeria’s total state external debt rose to $4.812 billion, with Ogun accounting for $21.8 million of the increase.
Enugu State proposes a ₦1.62 trillion budget for 2026, representing a 66.5 per cent increase from the previous year. Loans and capital receipts are expected to contribute ₦329 billion, or 20.3 per cent of the total budget. The Debt Management Office reported that as of Q2 2025, Enugu had the highest domestic debt stock in the South-East at ₦180.5 billion.
Osun State’s ₦723.45 billion budget depends on capital receipts for 39.5 per cent of its funding, while Delta State plans to source ₦694 billion, or 41.7 per cent of its ₦1.664 trillion budget, from loans and grants. Gombe State is the most dependent among the group, with 60.8 per cent of its ₦535.7 billion budget expected from borrowing and capital receipts.
Commenting on the trend, former Vice-Chancellor of Crescent University, Prof. Sheriffdeen Tella, said states should live within their means and focus on improving IGR rather than accumulating debt. He warned that the Federal Government’s heavy borrowing has weakened fiscal discipline across all tiers of government.
Similarly, the Assistant General Secretary of the Nigeria Labour Congress, Chris Onyeka, criticised Nigeria’s budgeting process, noting that poor implementation and lack of consequences for violations have eroded public confidence. While acknowledging that borrowing is not inherently wrong, Onyeka stressed that debt must be transparently managed and used to support productive investments.
Analysts caution that continued reliance on non-recurring funds could undermine fiscal sustainability, particularly for states with weak revenue bases. They warn that unless transparency, accountability, and revenue efficiency improve, the growing debt burden may place future generations under significant financial strain.