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James Emejo in Abuja, Nume Ekeghe and Jessica Erobomhan
In spite of significant expansion in fiscal resources at the subnational level, following petrol subsidy removal, actual development remained unimpressive, according a report by the civic-tech organisation, BudgIT.
That was despite aggregate revenue tripling to N15.53 trillion in 2025, from N4.84 trillion in 2022.
BudgIT in its latest report, “Nigeria’s Economic Reforms: What Has Changed Across Nigeria’s States? An Analysis of State Finances in the Post-Subsidy Years,” said notwithstanding massive increase in funds available to the subnational governments, higher revenues had not sufficiently translated into improved welfare, better public services, or measurable development outcomes for citizens.
Speaking on the report during an interview on Arise TV, Co-founder and Director of BudgIT, Oluseun Onigbinde, said the figures showed the extent to which states remained dependent on federal transfers and stressed the need for them to build stronger IGR bases.
According to the report, states recorded a 220.76 per cent nominal increase in revenue within the three years under review, representing a compound annual growth rate (CAGR) of 47.48 per cent.
However, much of the revenue windfall came from federal transfers rather than a fundamental transformation in states’ capacity to raise resources independently, the report stated.
The report indicated that aggregate Federation Account Allocation Committee (FAAC) receipts increased by 232.06 per cent, from N3.43 trillion in 2022 to N11.38 trillion in 2025, with a CAGR of 50.2 per cent.
Meanwhile, Internally Generated Revenue (IGR) rose by 165.01 per cent, from N1.57 trillion to N4.15 trillion, representing a CAGR of 38.38 per cent.
FAAC accounted for 68.7 per cent of aggregate state revenue in 2022 but increased to 73.3 per cent in 2025, while IGR’s contribution fell from 31.4 per cent to 26.7 per cent.
The analysis also showed that though states spent more on capital projects, salaries and cost of government took a fortune while debt repayments continued to take a sizeable chunk of the resources.
BudgIT pointed out that there had been expansion in fiscal capacity without a corresponding deepening of fiscal independence.
The report stated that the revenue surge followed major fiscal and macroeconomic changes, particularly the removal of the petrol subsidy in 2023 and the unification of the foreign exchange market, which increased revenues accruing to the Federation Account and subsequently expanded allocations to states.
However, it stressed that the critical issue was no longer simply how much money states received, but how effectively the additional resources were converted into development.
According to the findings, aggregate actual expenditure also increased substantially, climbing from N6.22 trillion in 2022 to N17.88 trillion in 2025, representing a 187.53 per cent nominal increase and a CAGR of 42.20 per cent.
Capital expenditure recorded a particularly significant expansion, rising from N2.79 trillion to N10.85 trillion over the period, it stated.
Infrastructure spending also surged, increasing from N1.44 trillion in 2022 to N5.64 trillion in 2025 — an increase of 292.12 per cent and a CAGR of 57.69 per cent.
Infrastructure consequently absorbed a larger proportion of aggregate state expenditure, rising from 23.1 per cent in 2022 to 31.6 per cent in 2025.
Nonetheless, the findings suggested that the increase in development-related expenditure should not be interpreted simply as evidence of commensurate improvements in citizens’ welfare.
Education expenditure, for instance, rose from N923.66 billion in 2022 to N2.18 trillion in 2025, representing a 135.48 per cent nominal increase and a CAGR of 33.04 per cent.
Health spending also increased from N485.08 billion to N1.19 trillion, a 144.95 per cent increase and a CAGR of 34.80 per cent.
However, the report stated that the expenditure share on development priorities, such as education, declined amid the much larger expansion in overall state resources.
The report also found that personnel expenditure remained a major component of state spending, with increases in wage and salary obligations accounting for a substantial part of expenditure growth in many states.
Administrative spending also varied significantly, with some states recording substantial increases in spending on government houses, offices of the Secretary to the State Government, legislatures, and other administrative structures.
BudgIT stated that the trend underscored the continuing tension between the cost of running government and the need to channel scarce resources towards productive investment.
The report further established an increasing dependence on FAAC by state governments.
It stated that despite the 165.01 per cent increase in aggregate IGR, the growth was too insufficient to keep pace with expenditure as IGR’s contribution to total actual expenditure consequently declined from 25.17 per cent in 2022 to 23.20 per cent in 2025.
Although states were generating more revenue internally, their own resources financed a smaller proportion of their rapidly expanding expenditure.
BudgIT, therefore, warned that the apparent improvement in state finances could mask continuing structural dependence on federal transfers and, where necessary, other financing sources.
Enugu recorded the fastest overall revenue growth, with actual revenue rising from N102.68 billion in 2022 to N665.85 billion in 2025, representing a CAGR of 86.48 per cent.
Abia followed with 66.05 per cent, Niger with 60.47 per cent, Taraba with 54.33 per cent and Bauchi with 53.87 per cent.
Edo, Imo, Katsina, Anambra and Osun also recorded CAGRs above 50 per cent.
Lagos remained the largest revenue-generating state in absolute terms, with revenue rising from N889.45 billion in 2022 to N2.63 trillion in 2025.
Its 43.49 per cent CAGR, however, ranked 22nd among the reporting states.
On the other hand, Nasarawa recorded the slowest revenue growth at 27.94 per cent, followed by Kebbi at 32.59 per cent, Zamfara at 32.69 per cent, Ogun at 32.71 per cent, and Kaduna at 33.55 per cent.
Lagos remained by far the largest IGR generator, increasing collections from N656.35 billion in 2022 to N1.85 trillion in 2025.
Enugu was second with N406.77 billion, followed by Ogun with N237.65 billion, Delta with N206.44 billion, Oyo with N102.52 billion and Kano with N102.26 billion.
But Enugu also recorded the fastest IGR growth in the country, with collections jumping from N25.12 billion to N406.77 billion, representing a remarkable CAGR of 153.01 per cent, the report clarified.
Niger followed with 76.33 per cent, while Abia recorded 65.79 per cent. Ekiti, Bayelsa, Katsina and Cross River also posted strong growth.
Only three states recorded declines in IGR over the period: Ebonyi’s IGR slipped from N23.89 billion to N23.25 billion, representing a negative CAGR of 0.91 per cent. Sokoto declined from N23.60 billion to N20.58 billion, while Jigawa recorded the sharpest fall, from N59.40 billion to N35.27 billion, representing a negative CAGR of 15.95 per cent.
In addition, Abia recorded the fastest growth in actual expenditure, rising from N46.52 billion in 2022 to N409.56 billion in 2025, representing a CAGR of 106.48 per cent.
Enugu followed with 84.58 per cent, Niger with 76.08 per cent and Plateau with 73.27 per cent.
Kano, Borno and Jigawa also recorded expenditure growth above 60 per cent.
In absolute terms, however, Lagos remained the biggest spender, with expenditure rising from N1.27 trillion to N2.84 trillion.
Delta followed with N1.15 trillion, while Bayelsa recorded N1.06 trillion in 2025.
At the lower end of expenditure growth, Delta recorded a CAGR of 19.49 per cent, followed by Cross River at 26.03 per cent, Kaduna at 26.09 per cent and Ondo at 27.02 per cent.
BudgIT explained that the wide variations, reflected differences in fiscal priorities, existing commitments and the capacity of governments to implement projects.
The report identified Abia, Enugu, Niger, Plateau, Kano and Bayelsa as states that consistently performed strongly across several fiscal indicators, including IGR growth, capital expenditure and overall expenditure expansion.
Conversely, Ebonyi, Kaduna, Sokoto, Cross River and Kebbi recorded comparatively weaker performance across key indicators.
BudgIT added that the fiscal expansion between 2022 and 2025 created a rare opportunity for states to strengthen human development, infrastructure, and productive sectors, but the opportunity would only matter if increased resources produced measurable improvements in citizens’ lives.
Among other recommendations, the organisation called for greater investment in education, healthcare, agriculture, and critical infrastructure; stronger project appraisal, procurement and monitoring; protection of social-sector spending during fiscal shocks; improved budget credibility and implementation; and more efficient management of the cost of governance.
It also urged states to institutionalise performance-based budgeting, strengthen medium-term development planning, and improve public access to fiscal information.
In particular, it called on Akwa Ibom and Rivers to publish complete and timely budget implementation reports in standard formats to strengthen accountability and enable comparative analysis.
The study excluded the two states because of incomplete budget implementation data — Akwa Ibom for failing to publish detailed reports required for comprehensive analysis, while Rivers was excluded because of continuing political and governance challenges affecting disclosure of public resources.
BudgIT emphasised that the analysis was based on actual Q1-Q4 budget implementation reports rather than approved budgets, although the reports themselves were unaudited.
The report drew a sharp distinction between fiscal capacity and development delivery.
On borrowing, the report did not provide a consolidated figure for new borrowing or the total debt stock of the 34 states.
However, it stated that debt repayments continued to take a sizeable portion of states’ resources, meaning that the additional fiscal space created by higher revenues was not entirely available for new development spending.
States increased capital expenditure from N2.79 trillion to N10.85 trillion, while infrastructure spending jumped by 292.12 per cent to N5.64 trillion.
Yet personnel costs, administrative spending and debt obligations also continued to absorb substantial resources.
The fiscal position, therefore, improved in terms of revenue availability, but the underlying structure remained vulnerable.
The growing dependence on FAAC, the slower expansion of IGR relative to expenditure, and continuing debt-service obligations meant that states still faced challenges in achieving sustainable fiscal independence, the report stressed.
BudgIT said, “Ultimately, higher revenues do not automatically translate into development. The findings from this report show that states that combined stronger revenue mobilisation with prudent expenditure management and sustained investment in development priorities recorded better fiscal outcomes than others.
“Sustaining these gains will require continued commitment to transparency, accountability, efficient public spending, and evidence-based budgeting to ensure that increased fiscal resources translate into measurable improvements in citizens’ welfare.
“The findings also show that some state governments utilised this favourable fiscal environment more effectively than others. States such as Abia, Enugu, Niger, Plateau, Kano, and Bayelsa consistently recorded strong performance across several fiscal indicators, including internally generated revenue growth, capital expenditure, and overall expenditure expansion.”
It added, “Their performance reflects deliberate efforts to strengthen fiscal management and increase investment in development priorities. These states provide useful examples of how improved fiscal resources can be translated into stronger development outcomes through effective planning and execution.
“Conversely, Ebonyi, Kaduna, Sokoto, Cross River, and Kebbi recorded comparatively weaker performance across key fiscal indicators, including internally generated revenue growth, capital expenditure, and personnel expenditure. These findings suggest the need for renewed efforts to strengthen domestic revenue mobilisation, improve expenditure efficiency, and accelerate investments in priority sectors to maximise the benefits of the improved fiscal environment.”
BudgIT stated, “Overall, the analysis demonstrates that increased revenues alone do not guarantee improved fiscal sustainability or development outcomes. The states that achieved the strongest results were generally those that combined improved revenue mobilisation with prudent expenditure management and sustained investment in productive sectors.
“Going forward, all state governments should prioritise strengthening internally generated revenue, improving expenditure efficiency, ensuring timely implementation of capital projects, and adopting sustainable financing strategies that translate fiscal resources into measurable improvements in the welfare of citizens.”
The report stated, “The analysis also reveals notable variations in administrative expenditure across states. While some states maintained relatively moderate spending on governance institutions, others recorded substantial increases in allocations to government houses, offices of the secretary to the state government, state legislatures, and other administrative structures.
“These differences highlight variations in the composition of state expenditure and the allocation of resources to administrative functions across states during the review period.”
It said, “Personnel expenditure remained a major component of state spending throughout the period, although growth patterns differed considerably across states. In many instances, increases in personnel expenditure accounted for a substantial share of total expenditure growth, reflecting the rising cost of wage and salary commitments across state governments.
“Overall, the report finds that although Nigerian states collectively experienced stronger nominal revenues and higher expenditure levels between 2022 and 2025, the composition of expenditure differed significantly across states.
“Expenditure on education, health, infrastructure, personnel, and administrative functions increased over the review period, although the pace of growth and the distribution of resources varied across jurisdictions.
“These variations provide insight into differences in expenditure patterns and fiscal management across Nigeria’s subnational governments.”
Onigbinde said regarding the report, “States are very, very dependent on FAAC. I mean, if you look, at around 28 states have dependence on FAAC for at least 70 per cent of their revenue, around 28 states right now, and it’s getting more, it’s gotten worse in recent times.”
Onigbinde said one of BudgIT’s key concerns was for states to develop enough internally generated revenue to cover their recurrent obligations, particularly given the volatility of oil revenues.
“One of the things we care about is that states should be able to cover their operating expenses from their IGR because of the way oil prices fluctuate significantly,” he said.
He, however, acknowledged the efforts by states to improve their domestic revenue mobilisation.
“So, from our own perspective or our own position, we are happy that you know states are taking IGR much closely,” he said.
Onigbinde questioned whether the increase in spending was translating into productive investments and better outcomes for citizens, particularly as states increasingly allocate more resources to capital projects.
He also highlighted the performances of Abia and Enugu, although for different reasons.
He commended Abia for its broad improvement across several indicators in the BudgIT assessment, including revenue growth, IGR growth, expenditure, capital expenditure, and administrative costs.
Onigbinde stated, “We have to first give kudos to Abia in that report because if you look at almost every indicator that we wanted to matter in terms of revenue growth, in terms of IGR growth, in terms of personal spending, in terms of expenditure capex, or in terms of low rate or administrative costs, Abia features significantly at the very top.”
On Enugu, however, Onigbinde said BudgIT raised questions over the mechanisms behind the state’s significant increase in IGR and engaged with the state to provide an opportunity for peer review.
He stated, “We have states like Enugu, whose IGR rose very significantly, and we had questions. We had some sit downs with them about the mechanisms, so that they can get an opportunity for peer review.”