…Lagos, Ogun, Abia lead borrowing plans
…Nigeria’s debts rise to N152.4trn, driven by enlarged external borrowing
Ben Eguzozie
Ten Nigerian states are set to borrow N4.287 trillion from loans, grants capital receipts and public-private partnerships to fund capital projects outlined in their 2026 budget proposals. This year, more than half of Nigeria’s 36 sub-nationals went for trillion naira budgets.
The combined budgets of the 10 states amount to N14.174 trillion. The states are: Lagos, Abia, Ogun, Enugu, Osun, Delta, Sokoto, Edo, Bayelsa, and Gombe. In particular, Lagos, Ogun and Abia are among the states relying heavily on borrowing for capital projects.
These states presented total budget of N14.174 trillion to their respective state assemblies, indicating a growing dependence on non-recurring funding sources beyond federal allocations and internally generated revenues (IGRs).
Findings indicate that while statutory handovers from the Federation Accounts Allocation Committee (FAAC), value-added tax (VAT) receipts and IGR remain key revenue sources, many states are ever more relying on borrowing and grants to close funding gaps as they pursue infrastructure and development projects.
Economists, development experts and labour leaders have raised concerns that the trend reflects weak fiscal discipline and revenue leakages rather than a lack of income. They warn that excessive borrowing would leave long-term debt burdens on the states.
As most of the sub‑nationals set their 2026 budget bar at trillion naira, analysts wonder if they can pull it off, while Nigerian production remains stagnant. Most of the sub‑nationals that have tabled their 2026 budgets went for little below or above the trillion‑naira mark. Perhaps, except for Lagos, the sub-nationals are counting on the same three‑tier revenue pot that every state gets from the federal pool, plus a few extra streams they try to crank up through internally generated revenues.
In Lagos State, Governor Babajide Sanwo-Olu proposed a N4.237 trillion budget for 2026, with about N1.117 trillion (representing 26.4%) expected to be sourced from loans and bonds to fund capital projects, despite the state’s strong IGR base. Abia’s Alex Otti presented N1.016 trillion budget, with a financing gap of N409 billion (40.3 per cent), which the government plans to cover through borrowing and other non-recurring sources. The state though recorded a significant reduction in its domestic debt in 2025, according to data from the Debt Management Office (DMO). Ogun State’s N1.669 trillion budget also shows reliance on loans and grants worth N518.9 billion, accounting for over 31 per cent of its funding needs.
In similar vein, Enugu’s Governor Peter Mbah proposed N1.62 trillion, Delta tabled N1.6 trillion, Akwa Ibom went for N1.39 trillion, Ebonyi’s Governor, Francis Nwifuru tabled N0.885 trillion, Cross River’s Bassey Otu proposed N0.780 trillion, Anambra went for N0.757 trillion, Imo proposed N1.44 trillion. Up north, Kano’s Governor Abba Kabir Yusuf presented N1.368 trillion. In Katsina, Governor Dikko Umaru Radda has already signed the N0.897 trillion 2026 budget into law. For Plateau, Governor Caleb Muftwang proposed N0.914 trillion, Nasarawa’s Governor Abdulhali Sule sent a N0.517 trillion budget proposal to the state Assembly, Jigawa went for N0.693 trillion.
By far, Federation Account Allocations Committee (FAAC) allocations is the big cheque — hands out the bulk of a state’s money each month. In 2024, the 36 states together received N5.38 trillion, with oil‑rich states like Delta, Rivers and Akwa Ibom getting the biggest slices (N485 billion, N384 billion, and N338 billion, respectively). The vertical formula gives states 26.72 per cent of total federation revenue, while local governments get 20.60 per cent. Because the pool is driven by oil sales, exchange gains and VAT, any uptick in those numbers lifts the whole allocation.
In addition, Value-Added Tax (VAT) redistribution is a major source of federal revenue, and the way it is shared is deliberately redistributive. Lagos and Rivers contribute the lion’s share of VAT (N249.77 billion and N70.54 billion in 2024) but receive only a fraction of what they put in (N40.22 billion for Lagos and N15.54 billion for Rivers in 2024, according to National Bureau of Statistics data). Contrariwise, lower‑contributing states such as Kano, Anambra and Akwa Ibom get back more than they pay, which helps them balance their books.
For the 2026 budgets, states that are net VAT receivers are hoping the continued growth in VAT collections (up 27 % in the latest 12‑month period) will keep that extra cushion flowing.
Experts warn of fiscal risks. Sheriffdeen Tella, an economist and former vice-chancellor of Crescent University, said, states should rather prioritise living within their means, and strengthen revenue management.
“Nigeria’s fiscal challenge lies more in revenue mismanagement than insufficient income. “Borrowing has become routine due (in Nigeria) to weak oversight at all levels of government,” Tella said.
For Chris Onyeka, assistant general secretary of Nigeria Labour Congress (NLC), poor budget implementation is the bane of Nigerian states. He argued that weak enforcement has reduced budgets to mere formalities rather than binding fiscal plans.
Also, analysts warn that excessive reliance on non-recurring funds by Nigeria and its subnationals could threaten fiscal sustainability. There is also mixed debt profiles across the states. Some states like Osun, Delta and Bayelsa recorded reductions in their debt profiles in 2025. Enugu and Gombe continued to rely heavily on loans and capital receipts to fund over 20 per cent and 60 per cent of their budgets, respectively.
Fiscal analysts warn that overdependence on borrowing and grants expose states to funding delays, rising debt servicing costs and sustainability risks, especially for states with weak IGR bases. Today, 12 Nigerian states are among those with the highest debt per person as Nigeria’s debt profile rise steeply. Data by BudgeIT, the social accountability platform, shows that two Nigerian states have about N100,000 debt per capita. This development comes as Nigeria’s total debt profile has risen to N152.4 trillion, driven by increased external borrowing.
