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Capital spending by Nigerian state governments collapsed by nearly 58 percent in the first three months of 2026, with 26 states collectively cutting infrastructure expenditure by N2.19 trillion between the fourth quarter of 2025 and the first quarter of this year — a contraction that analysts are reading as a combination of post-budget-cycle slowdown, mounting debt pressure and the early gravitational pull of 2027 election politics on government priorities.
The figures, drawn from quarterly budget implementation reports published on state government websites, show total capital expenditure among the 26 reporting states falling from N3.79 trillion in the October-to-December 2025 period to N1.59 trillion between January and March 2026. Only one state — Oyo — recorded a significant increase. Every other reporting state posted a decline, with some of the drops reaching proportions that go well beyond seasonal adjustment.
Enugu recorded the sharpest contraction in percentage terms, with capital spending collapsing 91.4 percent from N365.69 billion to N31.37 billion. Bayelsa fell 79.9 percent, from N384.81 billion to N77.51 billion. Benue and Kwara both dropped 77.8 percent. Adamawa shed 74.7 percent. Cross River fell 83 percent, from N114.32 billion to N19.48 billion. Ondo, Sokoto, Zamfara and Katsina all recorded declines above 70 percent.
Lagos, as the country’s wealthiest state, remained the largest spender in absolute terms despite posting its own contraction. The state spent N340.76 billion on capital projects in the first quarter, down from N535.46 billion in the previous quarter — a reduction of N194.70 billion or 36.4 percent that is significant in isolation but modest compared to what most other states experienced.
Oyo’s trajectory ran in the opposite direction entirely, with capital expenditure rising 119.5 percent from N105.35 billion to N231.27 billion. The surge made Oyo the second-highest spending state during the period. It also recorded the highest borrowing figure among all reporting states — N164.88 billion in fresh loans during the same three months, accounting for nearly half of the N361.98 billion in combined borrowings recorded across all 26 states. The relationship between Oyo’s spending spike and its borrowing level is direct and significant.
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Across the 26 reporting states, 13 recorded fresh borrowings in the first quarter despite the widespread fall in capital expenditure — a dynamic that raises questions about what the borrowed money is actually financing. The total subnational borrowing of N361.98 billion over three months, against a backdrop of collapsing infrastructure spending, suggests that debt is increasingly being used to support recurrent obligations rather than the development projects that justify long-term borrowing in economic terms.
The backdrop matters. A separate analysis found that the external debt of 32 states and the Federal Capital Territory climbed to nearly $5.7 billion in fresh loans during 2025, even as FAAC allocations increased. States are simultaneously receiving more federal transfers, borrowing more externally and spending less on infrastructure — a combination that points to structural fiscal dysfunction rather than temporary budget cycle effects.
Analysts offered a range of explanations for the first-quarter drop. The Centre for the Promotion of Private Enterprise CEO Muda Yusuf argued that capital expenditure patterns are inherently back-loaded in Nigeria because procurement, contracting and tendering processes take time. “For capital expenditure to gather momentum, it usually gets to the second or third quarter before you begin to see significant spending,” he said. The argument has merit as far as it goes — the fourth quarter of any year typically sees aggressive spending as governments push to exhaust annual appropriations before deadlines, making the first quarter of the following year look weak by comparison.
But Babcock University economics professor Segun Ajibola pointed to a more persistent problem — the enduring dominance of governance costs over development spending at the state level, with inadequate oversight producing minimal economic benefit for ordinary residents. Proshare Nigeria chief economist Teslim Shitta-Bey warned that the trajectory of subnational debt accumulation without corresponding revenue growth was building toward a fiscal stability crisis. “Most of the governments, including the Federal Government, are unable to manage their balance sheets properly,” he said, arguing that borrowing had become a default operational mechanism rather than a targeted financing instrument for specific development objectives.
The 2027 election dimension is not peripheral to this analysis. Political cycles in Nigeria have a documented effect on government spending patterns, with administrations concentrating expenditure on politically visible recurrent transfers — salary arrears, security spending, patronage networks — as election season approaches, while deferring capital projects whose benefits materialize too slowly to influence voter behavior in the short term. Ten states had not published their first-quarter financial reports at all as of Sunday, a transparency failure that limits the completeness of any national picture and raises questions about what those figures would show if they were available.
