Inside Sanwo-Olu’s ₦4.2tn Budget: Strategy, Politics and Fiscal Realities

By Kazeem Ugbodaga

The Lagos State Government’s 2026 Appropriation Bill, valued at ₦4.237 trillion, marks the most ambitious fiscal proposal in the state’s history.

It signals a determined push toward accelerated development, infrastructure expansion and legacy consolidation as Governor Babajide Sanwo-Olu enters the final full year of his administration.

The budget is presented as the “Budget of Shared Prosperity,” a title that suggests both economic optimism and political messaging ahead of 2027.

The budget is anchored on a projected revenue of ₦3.993 trillion, leaving a relatively modest deficit of ₦243.3 billion. This deficit, at about six percent of the total budget size, is well within sustainable limits for a subnational economy as large and diversified as Lagos.

Notably, internally generated revenue accounts for ₦3.119 trillion of the total revenue estimate, reinforcing Lagos’ position as Nigeria’s most economically self-sustaining state. Federal transfers are expected to contribute ₦874 billion, a reminder that Lagos still benefits significantly from national revenue frameworks even as it aggressively expands its own income sources.

A defining feature of the 2026 budget is the strong tilt toward capital expenditure, which stands at ₦2.185 trillion. Slightly more than half of total spending is directed toward long-term investments in infrastructure, transport, public works, housing, health facilities, and education upgrades.

This signals a clear intention to deliver visible, large-scale projects before the administration winds down in 2027. Recurrent expenditure, set at ₦2.052 trillion, remains substantial but is kept below capital spending, reflecting a deliberate prioritisation of economic expansion over administrative consumption.

The recurrent spending structure itself reveals several important commitments. Overhead costs amount to ₦698.8 billion, subventions account for ₦201.2 billion, and dedicated expenditure stands at ₦184.1 billion. These figures underline the scale at which Lagos operates as a megacity: running its institutions, maintaining public services, and funding statutory obligations all require significant resources. Personnel costs reach ₦440.4 billion, a figure that reflects the large workforce employed across ministries, agencies and frontline service institutions. Debt servicing obligations, split between recurrent charges and repayments, total over ₦527 billion. This is not insignificant, but it remains proportionate relative to Lagos’ revenue base and borrowing capacity.

The sectoral allocation paints an even clearer picture of the administration’s priorities. Economic affairs receives the largest share with ₦1.37 trillion, underscoring Lagos’ commitment to roads, transportation networks, economic infrastructure and enterprise support. General public services follow at ₦847 billion, sustaining the administrative backbone of the state.

Key social sectors also receive significant attention: health gets ₦338 billion, education ₦249 billion, environment ₦235 billion and housing ₦123 billion. These allocations indicate a governance approach that tries to balance hard infrastructure with human development, even though the bulk of spending still leans toward economic rather than social priorities.

The political significance of the budget is impossible to ignore. Governor Sanwo-Olu noted in his speech that 2026 is the final full year of his second term, calling it a “pivotal period” for completing ongoing projects and consolidating his legacy. This budget, therefore, serves as both a governance instrument and a political roadmap. The administration intends to deliver tangible gains—better roads, safer waterways, improved schools and hospitals, and expanded transit systems—before Lagos returns to the polls in 2027.

Economically, the proposed spending could produce short-term job creation through construction projects, increased consumer spending, and heightened private-sector confidence. Over the medium to long term, improved infrastructure and service delivery could enhance productivity, expand the tax base, attract new investments and strengthen Lagos’ position as West Africa’s commercial hub. The planned investments in health and education may help improve human capital outcomes, while spending on environmental management and social protection is likely to soften the impact of urban pressures on vulnerable groups.

However, the budget’s ambitions are not without challenges. The revenue target of ₦3.119 trillion in IGR is bold and may come under pressure if the national economy experiences shocks. Inflation, interest-rate fluctuations or currency instability could affect both revenue and expenditure performance. Execution capacity also remains a concern, as Lagos has historically struggled to complete all capital projects within a single fiscal cycle. Debt servicing, though manageable for now, may grow if future deficits widen or revenue falls short.

Despite these risks, the 2026 budget represents a confident, expansive and forward-looking plan. It suggests an administration determined to maximise its final full year by driving growth, strengthening infrastructure and preparing Lagos for the next decade of urban transformation. As Sanwo-Olu put it, the objective is to “keep Lagos secure, keep Lagos working, keep Lagos growing and ensure that growth and prosperity are shared by all.”