Nigeria’s state governments have significantly increased spending on capital projects following a surge in revenue, while trade with India has rebounded to about $9 billion and the Federal Government continues to face substantial external debt repayment obligations. The developments are highlighted in fresh World Bank reports and trade figures, which point to opportunities for economic growth alongside concerns about public spending priorities and debt sustainability.
Key Highlights
- Nigerian states’ capital expenditure rose 151 per cent in real terms between 2023 and 2025, according to the World Bank.
- Nominal state capital spending increased from ₦3.4 trillion in 2021 to ₦9.6 trillion in 2025.
- Education’s share of total state expenditure fell from 14.9 per cent in 2021 to 12.1 per cent in 2025.
- Nigeria–India bilateral trade rose 26 per cent to approximately $9 billion in the 2025–2026 financial year.
- Nigeria has $6.4 billion in sovereign Eurobond principal falling due between 2024 and 2030.
- Nigeria’s 2036 Eurobond yield reportedly declined from 8.63 per cent in late 2025 to 7.57 per cent later in 2026.
- The World Bank warns that higher borrowing costs and refinancing pressures could reduce fiscal space for development.
World Bank Reports 151% Increase in State Capital Spending
The World Bank’s October 2026 Nigeria Development Update, titled Beyond the Federal Purse, reported that aggregate state revenues increased by approximately 93 per cent in real terms between 2023 and 2025. State government expenditure rose by about 92 per cent over the same period.
Capital expenditure recorded the strongest growth, increasing by 151 per cent in real terms. Its share of total state spending rose from 47.5 per cent to 61 per cent.
In nominal terms, capital expenditure by state governments climbed from ₦3.4 trillion in 2021 to ₦9.6 trillion in 2025, representing an increase of 182 per cent.
The increase followed changes in Nigeria’s fiscal and foreign exchange environment, particularly the removal of the petrol subsidy and exchange rate reforms. These changes boosted allocations from the Federation Account, while stronger Value Added Tax (VAT) receipts and increased internally generated revenue also contributed to the rise in available funds.
According to the figures, states’ internally generated revenue increased by 55 per cent between 2023 and 2025, while gross Federation revenue rose by 69 per cent in real terms.
Transport infrastructure received the largest share of the additional capital spending, with housing, agriculture and other economic projects also recording increases.
Education and Healthcare Spending Lag Behind Infrastructure
Despite the increase in state government revenue, the World Bank identified concerns about the distribution of public spending, particularly the slower growth in social sectors compared with infrastructure.
Although expenditure on health, education and social protection increased, these areas did not keep pace with capital investment.
Education’s share of total state expenditure declined from 14.9 per cent in 2021 to 12.1 per cent in 2025, while health spending remained at approximately seven per cent.
World Bank Country Director Mathew Verghis said the additional revenue available to state governments presented an opportunity to improve infrastructure and essential public services, including education, healthcare and water supply.
However, he stressed the importance of improving spending efficiency and accountability to ensure that increased revenue translates into better outcomes for residents.
The report also highlighted differences in states’ ability to finance their recurrent expenditure from internally generated revenue.
Lagos and, more recently, Enugu were identified as the only states whose internally generated revenue covered their recurrent costs. In 2025, Lagos generated revenue equivalent to 160 per cent of its recurrent spending, while Enugu recorded 377 per cent.
The figures underline the importance of strengthening domestic revenue collection and ensuring that increased public spending delivers measurable benefits.
Nigeria–India Trade Rebounds to $9 Billion
Meanwhile, trade between Nigeria and India has recovered, although it remains below the peak recorded several years ago.
Indian High Commissioner to Nigeria Abhishek Singh disclosed at a forum organised by the Lagos Chamber of Commerce and Industry (LCCI) and the Federation of Indian Export Organisations that bilateral trade reached approximately $9 billion in the 2025–2026 financial year.
The figure represents a 26 per cent increase from the $7.13 billion recorded in 2024–2025.
Trade between the two countries previously reached $14.95 billion in 2021–2022 before declining, partly because of weaker Indian purchases of Nigerian crude oil.
In September 2026, Vice-President Kashim Shettima and Indian Prime Minister Narendra Modi reportedly agreed to work towards restoring bilateral trade to nearly $15 billion.
India is seeking increased crude oil supplies from Nigeria, while both countries have expressed interest in expanding cooperation in fintech, electricity, pharmaceuticals and manufacturing.
The LCCI has also promoted Nigeria as a potential Atlantic production base for Indian companies seeking access to markets across the African Continental Free Trade Area.
However, the India–Nigeria Joint Trade Committee last met in April 2024, highlighting the need for sustained engagement to strengthen commercial ties and translate trade ambitions into investment and export growth.
Nigeria Faces $6.4 Billion Eurobond Repayment Obligations
While state finances and bilateral trade show areas of improvement, Nigeria continues to face a substantial external debt repayment schedule.
The World Bank’s October 2026 Africa Economic Update estimates that Nigeria has $6.4 billion in sovereign Eurobond principal falling due between 2024 and 2030.
The figure places Nigeria jointly third with Ghana among the sub-Saharan African countries covered by the report.
South Africa faces $11.8 billion in sovereign Eurobond principal maturities, followed by Nigeria and Ghana at $6.4 billion each, Angola at $3.9 billion and Kenya at $3.2 billion.
Across 13 countries, the combined Eurobond maturity burden stands at approximately $43.6 billion after buybacks through August 2026. Nigeria accounts for about 14.7 per cent of the total, while South Africa, Ghana and Nigeria together account for $24.6 billion, representing 56 per cent.
The World Bank warned that elevated borrowing costs and shorter Eurobond tenors could increase refinancing pressure and leave governments with less money for essential public services and development projects.
Although refinancing can reduce immediate repayment pressure, rolling over debt at higher interest rates may increase debt-servicing costs for years.
Read also:
- World Bank: Naira Holds Firm as African Currencies Face Pressure in 2026
- World Bank: Nigeria Can Cushion Petrol Price Shock Without Restoring Fuel Subsidy
- IMF Warns Governments to Cut Debt Fast as Global Public Debt Nears 100% of GDP
Improved Bond Yields and Foreign Reserves Offer Some Relief
Nigeria has recorded some improvement in market conditions, providing a degree of relief as it manages its external obligations.
The yield on Nigeria’s 2036 Eurobond reportedly fell from 8.63 per cent in late 2025 to 7.57 per cent later in 2026.
A $2.35 billion Eurobond issuance in late 2025 also helped address some near-term maturities, while the country’s gross foreign reserves were reported at approximately $54 billion.
These developments may strengthen Nigeria’s capacity to manage external payments and improve investor confidence. However, stronger reserves and improved bond yields do not eliminate the underlying debt obligations.
Nigeria must still repay or refinance the $6.4 billion in sovereign Eurobond principal falling due through 2030, while balancing debt servicing against spending on infrastructure, education, healthcare and other public priorities.
Conclusion
Nigeria’s fiscal and trade figures present a mixed economic picture. State governments are directing more money towards capital projects, and trade with India is recovering, but the decline in education’s share of public spending raises questions about development priorities.
At the same time, Nigeria’s $6.4 billion Eurobond repayment schedule highlights the continuing pressure of external debt obligations.
The key challenge for policymakers will be to convert higher revenues into better public services, strengthen trade and investment partnerships, and manage debt repayments without undermining long-term economic growth.
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