As Nigeria continues to navigate one of its most turbulent macroeconomic periods in recent years, the real test of reform is no longer measured by foreign reserves or exchange-rate movements alone, but also by improvements in the everyday realities of citizens. KEHINDE OLATUNJI reports on how South-West states are raising the stakes for welfare gains through their ambitious fiscal plans.

When the governments of South-West states unveiled their 2026 expansive fiscal plans, one thread ran through them – their collective prioritisation of infrastructure development and economic expansion, reflecting the growing fiscal space created after the removal of the fuel subsidy.

An analysis of the 2026 budgets of Lagos, Oyo, Osun, Ogun, Ondo and Ekiti states shows a combined expenditure profile exceeding N8.66 trillion, with a strong tilt toward capital projects designed to stimulate growth, modernise infrastructure and strengthen social services.

Lagos State leads with a budget size of N4.444 trillion, allocating over N2.34 trillion to capital expenditure, while approximately N2.052 trillion is dedicated to recurrent spending. Sectoral priorities include N339 billion for health; N249 billion for education; N147 billion for security; N236 billion for environmental management, and N124 billion for housing, reflecting the state’s continued emphasis on urban development and public service delivery.

Oyo State’s N892.09 billion 2026 Appropriation Law, tagged “Budget of Economic Expansion,” allocates N502.65 billion, representing 56.37 per cent, to capital expenditure, while N389.34 billion, or 43.63 per cent, goes to recurrent costs.
The spending framework aims to boost production capacity and reduce dependence on federal allocations by investing in infrastructure, education, and healthcare.

In Osun State, the N723.45 billion “Budget of Economic Transformation” devotes N402.68 billion, roughly 55 per cent, to capital projects and N320.77 billion to recurrent expenditure, including N135.01 billion for personnel costs and N185.77 billion for overhead and other obligations.

Ogun State approved a N1.669 trillion budget for 2026, representing a 58 per cent increase from its N1.054 trillion 2025 budget, with N1.044 trillion, or 63 per cent, channelled into capital development and N624.76 billion set aside for recurrent spending. Infrastructure receives the largest allocation in the fiscal plan, alongside significant commitments to education, health, and housing to sustain long-term economic growth.

Ondo State enacted a N524.41 billion budget, allocating N303.58 billion, representing 57.89 per cent, to capital expenditure and N220.83 billion to recurrent operations, making it the largest budget in the state’s history and signalling a focus on consolidation through infrastructure and social investments.

Ekiti State’s N415.57 billion ‘Budget of Impactful Governance’ adopts a different balance, allocating N163.57 billion to capital expenditure and N252 billion to recurrent spending, while projecting a state GDP of N8.8 trillion, driven by agriculture, infrastructure development, education, tourism, and support for the informal sector.

Combined, the six South-West states plan to spend approximately N4.76 trillion on capital projects and about N3.91 trillion on recurrent expenditure in 2026, indicating that more than half of total spending is directed toward development initiatives rather than administrative costs. This shift represents one of the most capital-intensive fiscal outlooks in the region’s recent history and reflects a broader policy alignment toward long-term economic transformation.

Compared with the previous fiscal year, several states significantly expanded their budgets, with Ogun State recording one of the sharpest increases. While 2025 budgets were largely shaped by economic stabilisation efforts amid inflationary pressure and currency volatility, the 2026 spending frameworks appear more growth-oriented, targeting roads, schools, healthcare facilities, housing and environmental management.

Economists attribute the enlarged fiscal capacity largely to increased revenues accruing to states following the removal of petrol subsidy, which boosted allocations from the Federation Account Allocation Committee (FAAC) and created excess funds compared with the pre-subsidy era.

These additional revenues have enabled states to scale up capital investment, but analysts warn that the sustainability of public confidence will depend on how effectively the subsidy windfall translates into measurable improvements, such as job creation, reduced transportation costs, improved healthcare access, and enhanced educational quality.

With trillions now committed to development spending across the South-West, attention is increasingly shifting from macroeconomic reforms to subnational governance outcomes, as citizens assess whether expanded budgets and increased revenues will deliver tangible improvements in living standards and economic opportunities.

Speaking on the development, the Director-General of the Development Agenda for Western Nigeria (DAWN) Commission, Seye Oyeleye, stressed the need for South-West states to prioritise economic reforms and infrastructure development, warning that political transitions and uneven resource utilisation could hinder progress.

Oyeleye described 2025 as a pivotal year for Nigeria’s economy, noting that inflation began to decline, foreign exchange markets stabilised, and reserves reached their highest levels in years.

He also noted that non-oil exports gained momentum, while increased federal allocations enabled subnational governments to meet critical obligations. He further observed that infrastructure development at both federal and state levels had generated employment opportunities, and that the president’s financial diplomacy efforts were beginning to yield results.

According to Oyeleye, the challenge moving forward is to ensure that macroeconomic stabilisation benefits reach ordinary citizens and translate into tangible improvements in living standards.

The DAWN chief stressed the need for South-West states to maintain strategic focus on economic diversification, particularly in agriculture and electricity, which he identified as fundamental for regional transformation.

He also highlighted the importance of collaboration on power infrastructure across states as a mechanism to boost productivity and attract investment.

Oyeleye highlighted the Lagos-Calabar coastal road as a transformative project for the region, noting that hinterland states such as Ekiti and Ondo could significantly benefit if strategic highway connectivity were to link them directly to the coastal corridor, unlocking new market opportunities.

In addressing the potential impact of upcoming off-cycle elections in Ekiti and Osun states, Oyeleye stressed: “With off-cycle elections approaching in two states, we must maintain unwavering economic focus. Political transitions should not derail the region’s growth momentum. The imperative is clear: keep our collective eyes on sustainable development.”

He also noted the South-West’s goal of doubling its contribution to non-oil exports through investments in agriculture and the service economy, explaining that this target requires deliberate policy action and active private sector engagement.

“The South-West has set an ambitious goal of doubling our contribution to non-oil exports through strategic investments in agriculture and the service economy. This goal is achievable with deliberate policy action and private sector partnership.”

Dr Akinwale Fashina, a Lagos-based development economist and public finance consultant, argued that the region may be entering its most coordinated growth phase in a decade. In his view, the capital-heavy budgets across Lagos, Ogun, Oyo, Ondo, Osun and Ekiti reflect a structural shift away from consumption-led governance.

“What stands out in the 2026 framework is the inversion of the traditional recurrent-to-capital ratio. When states are dedicating over 50 per cent of their budgets to capital projects, that signals intent. Infrastructure is not cosmetic spending; it is productivity infrastructure. If executed properly, it lowers transaction costs, improves market access and raises household incomes.”

Fashina pointed to Lagos’ N4.444 trillion budget and Ogun’s N1.669 trillion outlay as examples of subnational governments deliberately positioning themselves as growth multipliers, noting that improved inflation metrics and relative foreign exchange stability at the national level create a conducive macro backdrop for these investments to yield returns.

“Macroeconomic stability is a necessary condition. Subnational capital discipline is a sufficient condition. If both hold, the welfare effects will begin to show through job creation and private sector expansion,” he explained.

Speaking with The Guardian, Dr Amina Bello, a senior economist at a Lagos-based policy institute, said that macroeconomic stabilisation alone does not guarantee improvements in citizens’ daily lives.

She noted that while inflation has begun to ease and foreign reserves have strengthened, households, particularly low-income families, continue to face high costs for essential goods such as food, fuel, and transportation.

Dr Bello, who noted the importance of translating national economic gains into actionable local policies, also emphasised that state governments should prioritise direct investments in social services, such as healthcare, education, and affordable housing, to ensure that ordinary citizens feel the benefits of reform in tangible ways.

She also warned that without careful monitoring, budget surpluses and infrastructure spending could fail to reach the communities most in need, adding that governments should develop targeted programmes and engage with local leaders to ensure equitable distribution of resources across urban and rural areas.

The director of a regional development research group, Tunde Adeyemi, stressed the need for deliberate social support mechanisms to complement fiscal reforms, while also observing that despite federal and state allocations increasing, many Nigerians still experience daily hardships due to rising living costs, which means macroeconomic improvements must be paired with practical, community-level interventions.

Adeyemi also suggested that strategic investment in critical sectors such as agriculture and small-scale industries could generate jobs, increase incomes, and reduce dependency on subsidies, creating a more resilient economic environment for ordinary citizens.

He further argued that improved transparency and accountability in the disbursement of funds are essential.

“Tracking expenditure and engaging civil society can help ensure that government resources reach intended beneficiaries, strengthening public trust and the impact of economic reforms.”

An economic analyst specialising in regional development, Funmi Olojede, noted the importance of long-term planning in translating budgetary resources into citizens’ welfare.

She explained that infrastructure projects, while necessary, often fail to improve daily life unless they are complemented by social policies and maintenance programmes that support community access and usage.

Olojede pointed to the removal of fuel subsidies as an example, saying that while it has created additional fiscal space, without reinvestment in social services and targeted support for vulnerable populations, ordinary Nigerians may see little immediate benefit.

“It is important for states to adopt integrated approaches that combine infrastructure spending with investments in health, education, and local enterprises,” Olojede added.

Deliberate, data-driven policies and ongoing monitoring are critical to ensuring that economic reforms tangibly improve citizens’ lives.