Governors rely on FAAC allocations and borrowing to finance 2026 budgets

Several Nigerian states have proposed ambitious 2026 budgets that reveal heavy dependence on federal allocations, loans, and other non-recurring revenue sources, raising concerns about long-term fiscal sustainability.
In Abia State, Governor Alex Otti presented a ₦1.016 trillion budget, with ₦811.8 billion (80 percent) allocated to capital projects and ₦204.4 billion (20 percent) for recurrent expenditure. The state expects ₦83.2 billion from FAAC allocations, ₦67.1 billion from VAT, ₦26.5 billion from grants and aid, and ₦168 billion from other federal revenue channels, bringing total projected revenue to ₦607.2 billion. This leaves a deficit of ₦409 billion, representing about 40 percent of the budget. While internally generated revenue is expected to cover recurrent spending, capital projects will rely largely on federal inflows, grants, and borrowing.
Financial analysts warn that such dependence poses risks to fiscal stability. They note that federal transfers and borrowing are volatile and largely outside state control, leaving budgets exposed to external shocks. Over time, this reliance may also discourage innovation and the development of sustainable local revenue sources.
Ogun State shows a similar pattern with its ₦1.669 trillion budget. Internally generated revenue is projected at ₦509.88 billion, while federal transfers are expected to contribute ₦554.81 billion. An additional ₦518.9 billion is projected from capital receipts, including loans and grants. Although the budget appears balanced, more than 30 percent of the funding comes from non-recurring sources.
Enugu State’s ₦1.62 trillion budget represents a 66.5 percent increase over the previous year. Capital expenditure accounts for ₦1.296 trillion (80 percent), with recurrent spending at ₦321.3 billion (20 percent). Revenue projections include ₦870 billion from internally generated revenue, ₦387 billion from federal allocations, and ₦329 billion from loans and grants. Analysts estimate that about 20 percent of the planned spending depends on non-recurring funds.
Osun State approved a ₦723.45 billion budget, supported by ₦421.25 billion in recurrent revenue, ₦286.01 billion in capital receipts, and an opening balance of ₦16.19 billion. While projected inflows match the budget size, execution depends significantly on the successful mobilisation of capital receipts, which are not guaranteed.
Delta State’s ₦1.664 trillion budget allocates ₦1.165 trillion (70 percent) to capital expenditure and ₦499 billion (30 percent) to recurrent spending. The state expects ₦720 billion from statutory allocations and mineral derivation, and ₦250 billion from internally generated revenue. Despite anticipated improvements in revenue collection, the budget remains heavily tied to federal and oil-related inflows.
Sokoto State’s ₦758.7 billion budget relies on ₦389.3 billion from FAAC, ₦74.5 billion from internally generated revenue, and ₦233.8 billion from grants and development funds. With internally generated revenue contributing less than 10 percent of total projections, the state remains highly dependent on federal transfers and donor support.
Fiscal experts argue that states’ heavy reliance on FAAC allocations creates structural challenges for the federation. They recommend incentive-based mechanisms that reward states for improving their internally generated revenue, warning that without such measures, dependence on federal inflows will persist. Despite record FAAC distributions, improved living standards have not consistently followed, highlighting inefficiencies in fund utilisation.
Edo State’s ₦939.85 billion budget draws from multiple sources, including ₦160 billion from internally generated revenue, ₦480 billion from FAAC, ₦153 billion from grants and capital receipts, and ₦146 billion from public-private partnerships. However, the budget remains vulnerable to delays or underperformance of external funding sources.
Bayelsa State plans to spend ₦1.01 trillion, with projected revenue including statutory allocations, VAT, derivation funds, other FAAC inflows, loans, grants, and ₦85.9 billion from internally generated revenue. Less than 10 percent of total revenue is expected from local sources, underscoring strong dependence on oil-related federal transfers.
Gombe State’s ₦535.7 billion budget allocates ₦371.44 billion to capital projects and ₦164.25 billion to recurrent spending. The budget depends heavily on capital receipts and carryover balances to fund major projects.
Kwara State’s ₦644.004 billion budget is built on assumptions tied to national economic indicators, including oil prices, production levels, exchange rates, and GDP growth. This makes the state’s fiscal performance highly sensitive to federal revenue flows and macroeconomic conditions.
Experts stress that states must develop their comparative advantages in sectors such as agriculture, manufacturing, tourism, logistics, and services. Sustainable growth, they argue, requires stronger local economies, broader tax bases, disciplined spending, and effective public-private partnerships, rather than increased borrowing or reliance on federal transfers.
Overall, analysts observe that only a few states have budgets closely aligned with guaranteed revenue. Most states continue to project spending levels far above their internally generated revenue, depending on allocations, loans, grants, and donor funding. While total projected revenue nationwide could reach ₦35 trillion, any shortfalls are likely to affect capital projects, as recurrent obligations must be met first. Maintaining fiscal discipline and adhering strictly to the budget cycle remain critical for effective execution.