director of Quartus Economics, David Adeoye has revealed that state governments have become a significant force in Nigeria’s economy, controlling nearly 78 per cent of the federation’s capital expenditure (capex) in 2025.
Adeoye was speaking on the role of states in the central bank’s inflation-targeting plans on Channels Television on Monday.
The economist said states have moved from being bailout-dependent in 2016 to becoming the “big spenders” and “most potent force” in public spending today.
Quartus Economics analysis based on World Bank data showed that subnational governments’ share of federation capex rose from about 45 percent in 2023 to almost 76.7 per cent in 2025, leaving the federal government with less than a quarter of total capital spending.
The Quartus report said state governments’ capital expenditure stood at N14.7 trillion in 2025 — up from N3.72 trillion in 2023.
“Today, the state governments, and local governments too, have become the big spenders in the federation,” the director said.
“In fact, what we saw in 2025 was that the states controlling almost 78 percent of capex, places them as the most potent force in terms of spending.
“Compared to where the states were coming from, their capex has about quadrupled. It’s gone about 3.9x compared to where they were in 2023. So they have become very important in the economy.”
He said it is crucial for state governments to design their capital expenditure in a way that drives production rather than consumption or mere asset acquisition.
Adeoye also warned that without coordination between monetary authorities and subnational governments, the Central Bank of Nigeria (CBN) may be forced to rely heavily on interest rate hikes and money supply controls, potentially making credit too expensive for businesses.
“That is part of what the government is trying to avoid. They are saying beyond raising interest rates, beyond constraining supply of money through CRR and other measures, can we talk to the spenders? Can we have an engagement?” he said.
It is not even so much about the level of spending, it is about the quality and structure of the spending.”
The economist called for a shift towards productivity-driven governance, urging states to focus on what they can produce and how they can attract transformative investments.
The director warned that wage increases with weak productivity could fuel inflation if states fail to attract investment.
“States have to structure their spending and also drive towards efficiency and productivity,” Adeoye said.
He added that public sector efficiency should be assessed not only by wage payments but by outcomes in health, education, infrastructure, and other services.
The CBN had said uncoordinated and expansionary fiscal actions by state governments could undermine Nigeria’s transition to an inflation-targeting monetary policy framework.
