South West proposes N8.7tn 2026: combined  budget for economic growth

Determined to build abstrong and sustainable economy in the South West geo-political zone of Nigeria, the South-West states have proposed a combined budget of N8.7tn for 2026, with capital expenditure accounting for more than half of total spending.

This was disclosed on Tuesday,  by the Development Agenda for Western Nigeria Commission( (DAWN Commission)at the Commission’s 2026 Outlook event, a visual forum  where policymakers, economists, and civil society leaders converged to assess how the region can convert fragile macroeconomic stability into sustained growth, competitiveness, and improved welfare.

The virtual forum was themed ‘2026 South-West Nigeria Outlook: Advancing Subnational Economic Competitiveness’.

Opening the discourse, DAWN Commission Director-General Dr Seye Oyeleye said Nigeria’s recent macroeconomic and structural reforms, while painful, are starting to stabilise key economic fundamentals, creating a narrow but critical opportunity for subnational governments to pursue productivity-driven growth.

“We have implemented a bouquet of macroeconomic and structural reforms which, while difficult, have begun to restore confidence and recalibrate economic fundamentals.

Today, Nigeria can be described as operating within a space of fragile stability, a space that presents both risks and opportunities,” Oyeleye said.

“The critical question before us is how subnational governments translate this fragile stability into sustained productivity growth, fiscal resilience, and improved welfare outcomes for citizens, particularly in the Southwest, which has historically been Nigeria’s hub of innovation, enterprise, and economic leadership.”

He added that the 2026 outlook dialogue was designed to help states domesticate national reforms, align policies with emerging global realities, and strengthen regional cooperation as a pathway to shared prosperity.

“The discourse will explore how national reforms can be effectively domesticated to strengthen state-level competitiveness and economic resilience, while also assessing how the region can leverage global and domestic dynamics in 2026 and hedge against potential adverse impacts,” he said, noting that insights from the event would support more resilient economic decision-making across the region.

South-West leaders deliberating on economic growth of the zone.

Presenting the economic and budget outlook, Head of Economic Development and Research at DAWN Commission, Adesoji Farayibi, said the N8.7tn aggregate budget for the South-West reflects a growing emphasis on capital spending, estimated at N4.54tn, even as rising debt and fiscal fragility remain concerns. He explained that Lagos alone accounts for roughly 51 per cent of the regional budget, underscoring both its economic dominance and the need to analyse fiscal trends beyond the outlier state.

“When we disaggregate the South-West budget, removing Lagos as an outlier, we still see improvement in internally generated revenue across the region, alongside increased capital expenditure. However, we also observe fiscal fragility, particularly in the steady rise in total debt, which is a trend that really matters for sustainability,” he said.

He added that global developments, from renewed protectionism under a second Donald Trump administration and prolonged geopolitical tensions to tighter monetary conditions and rapid investment in artificial intelligence, will shape capital flows, trade, and financing conditions in 2026.

“The region must position itself to attract capital inflows, whether foreign direct or portfolio investment, and ensure these funds are channelled into critical sectors such as energy, power, transportation, infrastructure, and water. It is also important for the South-West to diversify external financing, relying more on multilateral loans rather than Eurobonds due to rising borrowing costs, while preparing to take advantage of opportunities inherent in AI investment,” he said.

Farayibi noted that off-cycle elections in Ekiti and Osun states, the approval of commercial oil exploration in Ogun State, the expected listing of Dangote Refinery, and increased focus on industrial clusters, technology, and agro-processing would all influence regional economic performance in 2026.

He stressed that states must reduce dependence on federal allocations by strengthening internally generated revenue through tax reforms and improved fiscal administration.

From the perspective of state-level fiscal management, Osun State Commissioner for Budget and Economic Planning, Professor Moruf Adeleke, cautioned against viewing capital and recurrent expenditure as a simple trade-off, arguing instead for a focus on efficiency and outcomes.

“Recurrent expenditure is a necessity. Institutions need to run, and some recurrent spending is required to support capital projects. The real issue is not how big recurrent expenditure is but the quality and efficiency of that spending,” Adeleke said. “In Osun State, our capital expenditure was close to 50 per cent in 2023 and 2025, and this year it has risen to about 56 per cent. While it is good to focus on capital expenditure, we must also ask how effective and efficient the recurrent expenditure is.”

He added that states cannot rely solely on budgetary resources to meet development needs.

“States should begin to benefit more from public–private partnerships and development partnerships. We cannot have resources that are sufficient to take care of recurrent needs and still have enough for capital projects, so collaboration is essential to deliver the infrastructure and investments our people need,” he said.

Providing an academic assessment, the Dean of the Faculty of Economics and Management Sciences at the University of Ibadan, Professor Abiodun Folawewo, emphasised that budgets are ultimately statements of intention whose impact depends on implementation and performance.

“Budget is an aspiration. Whether you get there or not depends on several parameters. Before we say a budget will drive productivity or competitiveness, we must critically evaluate past budget performance,” Folawewo said. “What we often see is that budgets are inspirational and laudable on paper, but implementation is where the problems arise. In some states, budget performance has not reached 70 per cent, with recurrent expenditure as high as 80 per cent of releases.”

He argued that productivity growth in the South-West hinges on investment in critical infrastructure, particularly power.

“Productivity is a function of what goes into the production process. We have seen repeated collapses of the national grid, and unless South-West states invest, through partnerships if necessary, in electricity and power generation, it will be difficult to talk about budgets having a real impact on productivity across sectors,” he said.

Also weighing in, Global Director of BudgIT, Mr Seun Onigbinde, warned that budgets across Nigeria are too often driven by political expediency rather than long-term development objectives.

“We are usually quick to look at the numbers, recurrent versus capital, but capital projects also have recurrent costs. The budget should be seen first as a planning tool, not just a document of numbers,” Onigbinde said. “What we see most times is short-termism: projects driven by what politicians or communities want to see immediately, rather than by evidence and long-term strategy.”

He further criticised uneven development and weak outcome evaluation.

“Development is often concentrated in state capitals, while projects that could open up agriculture, mining, and industry in rural corridors are neglected. We also lack strong outcome evaluation mechanisms. He asked,  “When we build a school or a hospital, to what end? Are we improving literacy, reducing maternal mortality, or increasing immunisation?” 

Onigbinde noted that ,. “Budgets must be depoliticised, guided by data, and focused on outcomes that future generations can look back on as foundations for sustainable growth”.