BY GODWIN OBI WITH REPORTS FROM JAMES AKINOLA
Capital expenditure by 26 state governments declined sharply by N2.19tn within three months in the first quarter of 2026, raising concerns over slowing infrastructure development and mounting fiscal pressure as political activities ahead of the 2027 general elections intensify.
An analysis of quarterly financial reports published on the official websites of the affected states showed that total capital spending fell from N3.79tn in the fourth quarter of 2025 to N1.59tn in the first quarter of 2026, representing a 58.1 per cent decline.
Further checks showed that between January and June 2025, 31 states spent a combined N2.75tn on capital projects, averaging N1.38tn within the six-month period.
The decline comes amid increasing political alignments and preparations for the 2027 elections, with analysts warning that governments may be shifting focus from long-term infrastructure investment to political considerations and recurrent expenditure.
Data obtained by Frontline Reporters from quarterly budget implementation and financial performance reports indicated that only Oyo State recorded a significant increase in capital expenditure during the period under review, while most states posted sharp declines.
Capital expenditure refers to government spending on long-term developmental projects such as roads, schools, hospitals, housing, electricity, water supply, and transportation infrastructure aimed at improving economic growth and public welfare.
Out of the 36 states, only 26 had uploaded their first-quarter financial reports as of the time of filing this report. States with available data include Adamawa, Akwa Ibom, Bauchi, Bayelsa, Benue, Borno, Cross River, Ebonyi, Ekiti, Enugu, Gombe, Jigawa, Kaduna, Kano, Katsina, Kebbi, Kogi, Kwara, Lagos, Niger, Ondo, Oyo, Sokoto, Taraba, Yobe, and Zamfara.
States whose reports were unavailable include Abia, Anambra, Delta, Edo, Imo, Nasarawa, Ogun, Osun, Plateau, and Rivers.
Lagos Leads Despite Decline
Lagos retained its position as the highest spender on capital projects despite a drop in expenditure. The state spent N340.76bn in the first quarter of 2026, down from N535.46bn in the previous quarter, representing a decline of N194.70bn or 36.4 per cent.
Oyo State emerged as the only major exception to the nationwide slowdown, increasing its capital expenditure from N105.35bn in Q4 2025 to N231.27bn in Q1 2026 — a rise of N125.93bn or 119.5 per cent.
The increase coincided with the state’s borrowing profile, as Oyo also recorded the highest loan figure among reporting states, borrowing N164.88bn during the period.
Akwa Ibom recorded one of the steepest cuts, reducing capital expenditure from N428.64bn to N137.39bn, a decline of N291.26bn or 67.9 per cent.
Bayelsa’s spending also plunged from N384.81bn to N77.51bn, representing a reduction of N307.30bn or 79.9 per cent, while Enugu recorded one of the sharpest contractions, dropping from N365.69bn to N31.37bn — a massive 91.4 per cent decline.
Kano’s capital spending fell modestly from N141.29bn to N121.96bn, representing a 13.7 per cent decrease, while Niger State reduced expenditure from N116.05bn to N79.28bn and borrowed N39.28bn within the same period.
Other states that recorded significant declines include Kaduna, Katsina, Benue, Cross River, Ebonyi, Ekiti, Gombe, Kebbi, Kogi, Kwara, Ondo, Sokoto, Taraba, Yobe, Zamfara, Adamawa, and Borno.
States Borrow N361bn Despite Lower Spending
Analysis of the reports further showed that the 26 states borrowed a combined N361.98bn in the first quarter of 2026 despite the widespread decline in capital expenditure.
Oyo topped the borrowing chart with N164.88bn, followed by Bauchi with N56.57bn and Niger with N39.28bn. Taraba secured N23.4bn in fresh loans, while Ebonyi and Yobe borrowed N20bn each.
Katsina obtained N8.55bn, Kaduna borrowed N8.06bn, while Gombe secured N7.61bn. Jigawa recorded N6.27bn in loans, Ekiti borrowed N3.01bn, and Borno obtained N2.85bn.
Kwara borrowed N438.88m, Ondo secured N300m, while Kogi recorded the least borrowing figure at N5.32m.
The figures revealed that 13 out of the 26 states that published financial reports obtained fresh loans during the quarter, highlighting growing dependence on debt financing amid fiscal challenges and shrinking capital spending.
Analysts Raise Concerns
Economic analysts attributed the sharp decline partly to the usual slowdown that follows aggressive end-of-year spending aimed at exhausting annual budgets before deadlines.
A Professor of Economics at Babcock University, Segun Ajibola, said the problem of high governance costs at the state level had persisted due to weak accountability structures.
The Director and Chief Economist at Proshare Nigeria LLC, Teslim Shitta-Bey, warned that the rising debt burden could threaten the fiscal sustainability of subnational governments.
Speaking to Frontline Reporters, Shitta-Bey said many state governments and the Federal Government had failed to manage their balance sheets properly, adding that borrowing should not become the default option for financing operations.
Macroeconomic analyst Dayo Adenubi urged states to intensify efforts toward boosting internally generated revenue to reduce reliance on debt and federal allocations.
However, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, argued that capital expenditure often records slower spending during the early part of the year because of lengthy procurement and contracting processes.
According to him, recurrent expenditure such as salaries and routine operations are easier to process, while capital projects require more bureaucratic procedures and disbursements usually increase in the second and third quarters.
Analysts warned that continued reductions in capital spending could negatively impact infrastructure development, job creation, and economic growth at a time states are expected to drive economic activities more aggressively.
Despite the slowdown, Lagos, Oyo, Akwa Ibom, Kano, and Bauchi emerged as the top five states in terms of capital expenditure in the first quarter of 2026.
Financial experts have consistently cautioned that rising debt accumulation without corresponding revenue growth may worsen fiscal sustainability challenges for many state governments, although states insist that borrowings remain necessary to finance critical infrastructure projects and bridge funding gaps.
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