Nigeria's 36 states and the Federal Capital Territory (FCT) have collectively increased their budgets by 47.5%, reaching a total of N40.14 trillion for the year 2026, up from N27.22 trillion in 2025. However, despite this substantial rise in overall budget figures, the allocation for capital projects has notably decreased, raising concerns about the future of infrastructure development and economic growth in the country.

An analysis of the budgets reveals that capital expenditure now constitutes 64.34% of the total budget, a significant drop from 73.24% in the previous year. In absolute terms, this translates to N25.83 trillion earmarked for capital projects in 2026, compared to N19.94 trillion in 2025. This decline in the share of capital spending indicates a shift in focus towards recurrent expenditures and other financial obligations, even as state governments aim to enhance infrastructure and stimulate economic activity.

The spending patterns vary across Nigeria's geopolitical zones. Regions such as the South-South, North-West, and North-East have increased their allocations for capital projects, while the South-East, South-West, and North-Central have reduced theirs. For instance, the FCT has raised its capital expenditure to 76.19% of its budget, up from 72.3% last year, while the South-South region increased its capital spending from 58% to 70% of its overall budget. Conversely, the South-East has significantly cut its capital spending from 82.05% to 61%, despite an increase in its overall budget from N3.6 trillion to N5.73 trillion.

This trend of declining capital expenditure is concerning for analysts, who warn that reduced investment in infrastructure could hinder states' abilities to attract foreign investment. They emphasize that sustained funding for critical infrastructure such as roads, power, and water is essential for enhancing productivity and improving the business environment.

The increase in state budgets comes amid mounting fiscal pressures, with governments grappling with rising personnel costs, debt obligations, and demands for public services. Experts caution that state governments must find a balance between meeting recurrent commitments and investing in productive infrastructure that can drive economic growth and generate future revenue.

Notably, the federal budget for 2026, signed into law by President Bola Tinubu, stands at N68.32 trillion, significantly exceeding the combined budgets of the states and the FCT by N28.32 trillion. Analysts argue that state budgets should ideally surpass those of the federal government to ensure that development reaches grassroots levels effectively.

Economists have expressed disappointment over the declining capital spending, especially in light of Nigeria's growing population. Professor Jonathan Aremu highlighted the paradox of decreasing capital budgets amid rising infrastructure demands, stating, "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."

Chukwunonso Iheoma, a former central banker, noted that prioritizing recurrent expenditures over capital investments could lead to infrastructural deficiencies, making states less attractive to both local and foreign investors. Emerging markets analyst Ike Ibeabuchi attributed the trend to increased pre-election spending, where governors often prioritize immediate political gains over long-term infrastructure development. He called for a continued push towards increasing capital expenditure to foster rapid progress in Nigeria's development.