Nigerian States Face $4.25tn Capital Spending Shortfall Amid Debt and Recurrent Expenditure
Nearly 29 state governments in Nigeria are grappling with a combined capital project funding shortfall of N4.25tn, causing significant delays to critical infrastructure projects, The PUNCH reports.
Between January and September 2024, these states disbursed N3.76tn for capital projects—far below the N8.25tn budgeted for the year. This shortfall marks a N280bn drop compared to the N4.04tn spent on capital projects in 2023, despite a 40 per cent rise in monthly federal allocations.
Debt and Revenue Struggles
The financial crunch comes as states struggle to meet their internally generated revenue (IGR) targets. Collectively, they raised N1.92tn in IGR, falling short of the N2.868tn target by N948.28bn.
Amid these shortfalls, states borrowed N533.29bn while spending N658.93bn to service debts owed to domestic, foreign, and multilateral creditors. Alarmingly, governors allocated N1.994tn to recurrent expenditures—including travel, allowances, and utilities—between January and September 2024, reflecting a shift in spending priorities that analysts say undermines long-term development.
Infrastructure Spending: A Mixed Picture
While some states performed relatively well in capital spending, most fell woefully short of their targets. Lagos, Rivers, and Delta emerged as top spenders on infrastructure, but only 11 states achieved over 50 per cent of their projected capital expenditure.
Lagos allocated N770.03bn, achieving 57.8 per cent of its N1.32tn target.
Rivers spent N431.86bn, exceeding its N343.71bn target with a 79.6 per cent implementation rate.
Delta disbursed N237.09bn, achieving 58.1 per cent of its N408.35bn budget.
In contrast, states like Benue, Akwa Ibom, and Oyo reported some of the lowest implementation rates—14.7 per cent, 16.9 per cent, and 17 per cent, respectively.
The Bigger Picture
A recent Fitch Ratings report highlights systemic inefficiencies in tax collection and a heavy reliance on federal allocations as key contributors to the states’ fiscal woes. Rising inflation and increased minimum wages have further exacerbated recurrent expenditure, crowding out funds for capital investment.
The Federal Government’s capital spending has also declined, dropping 25.3 per cent to N1.99tn in the first half of 2024 compared to N2.68tn in the same period last year. Projections for 2025 indicate further cuts to capital expenditure, with its share of the budget set to fall from 42.3 per cent in 2024 to 34.4 per cent in 2025.
Expert Concerns
Analysts warn that the ongoing de-prioritisation of capital projects could hinder economic growth, exacerbate infrastructure deficits, and worsen public services. They urge state governments to improve revenue collection systems, reduce recurrent costs, and ensure efficient use of funds allocated for infrastructure.
As Nigeria’s states and federal government navigate these fiscal challenges, the growing funding gap underscores the urgent need for structural reforms to bolster economic resilience and meet the demands of a rapidly growing population.
