By Emmanuella Opara | November 4th 2026
KEY POINTS
- The World Bank says increased revenue to Nigerian states has not translated into proportionate investments in education, healthcare and social protection.
- Aggregate revenue across 34 states rose from N4.99tn in 2022 to N15.53tn in 2025.
- Federation Account transfers accounted for 73 per cent of aggregate state revenue between 2021 and 2025, excluding Lagos.
- States spent only N8.60tn, or 24.4 per cent of their combined N35.22tn approved budgets, by June 2026.
- Total debt across 35 states increased by 10.41 per cent to N11.67tn in 2025.
MAIN STORY
The World Bank has criticised Nigerian state governments for failing to translate increased revenue into proportionate investments in essential public services, particularly education, healthcare and social protection.
The global lender said spending on transport infrastructure had expanded considerably faster than investments in human capital, even in states with weaker development indicators.
A Senior Economist at the World Bank Nigeria Office, Gloria Joseph-Raji, made the observation on Tuesday in Abuja at the launch of BudgIT’s 2026 State of States Report, themed ‘From Allocation to Impact: Rethinking State Spending Priorities’.
She said that although expenditure on education, healthcare and social protection had increased, it had not matched the pace of growth in transport infrastructure spending.
Joseph-Raji said the bank’s October Nigeria Development Update, which examined budget implementation reports across all 36 states, found that governments had expanded transport infrastructure and reduced their debt burdens, particularly domestic debt.
She attributed the increase in state revenues to the removal of the petrol subsidy, exchange rate unification and improvements in tax administration since 2023. Federal intervention funds and the settlement of longstanding obligations to states also contributed to the additional resources.
According to her, the increased allocations had enabled state governments to meet salary obligations and created opportunities to improve public service delivery.
However, she warned that heavy reliance on Federation Account allocations remained a major weakness in state finances, exposing governments to fluctuations in federally shared revenue.
Federation transfers accounted for 73 per cent of aggregate state revenue between 2021 and 2025, excluding Lagos. In 2025, they represented more than three-quarters of revenue in all but a handful of states.
She also disclosed that internally generated revenue was sufficient to cover recurrent expenditure in only two states.
States receive 26.72 per cent of net Federation Account revenue and 55 per cent of Value Added Tax revenue under the revised sharing formula.
Providing figures on the growth in state finances, BudgIT’s Country Director, Vahyala Kwaga, said aggregate revenue across the 34 states covered in its comparative analysis increased from N4.99tn in 2022 to N15.53tn in 2025.
Federation Account Allocation Committee receipts rose by more than 232 per cent, from N3.43tn to N11.38tn within the same period.
Despite the revenue increase, Kwaga said the states had spent only N8.60tn, representing 24.4 per cent of their combined N35.22tn approved budgets, by June 2026.
He said BudgIT had adjusted its assessment methodology to give greater attention to spending on education, healthcare, agriculture, water and sanitation, alongside revenue performance and debt sustainability.
The report also showed an increase in state indebtedness. BudgIT’s Head of Research and Policy Advisory, Adejoke Akinbode, said the combined debt of the 35 states assessed rose by 10.41 per cent from N10.57tn in 2024 to N11.67tn in 2025.
Lagos ranked as the most indebted state, with N2.9tn in debt, while Osun spent N100.17bn on debt servicing, representing 28.6 per cent of its revenue.
In the overall fiscal sustainability ranking, Lagos came first, followed by Enugu, Bayelsa, Delta and Kebbi. Cross River ranked last, while Rivers was excluded because of inadequate fiscal data.
Akinbode urged state governments to reduce administrative expenditure, improve revenue collection and ensure that borrowing was directed towards productive investments.
An economist and lecturer at Amadeus University, Abia State, Dr Iboro Nelson, also questioned the developmental impact of increased government revenue, arguing that the additional resources had not sufficiently eased the economic difficulties faced by households following recent reforms.
She disclosed that state governments collectively budgeted N1.32tn for healthcare in 2024 but spent N816.64bn. Education expenditure stood at N1.61tn against an approved budget of N2.41tn.
According to her, average annual expenditure per resident amounted to N3,483 on healthcare and N6,981 on education, translating to approximately N290 and N582 monthly, respectively.
Nelson attributed the limited impact of increased allocations to weak budget implementation, unrealistic expenditure projections, overlapping projects and high recurrent costs.
Meanwhile, a Programme Manager at the Ford Foundation’s West Africa Office, Joy Ehinor-Esezobor, said fiscal performance should be assessed by improvements in citizens’ living conditions rather than revenue growth or rankings alone.
THE ISSUES
The figures presented at the report launch point to a gap between the growth in state government resources and the quality of public services delivered to residents.
Although increased allocations have improved the fiscal position of many states, the World Bank’s assessment suggests that infrastructure spending has received greater attention than investments in human capital.
The dependence on federal transfers also presents a challenge. With internally generated revenue sufficient to cover recurrent expenditure in only two states, many governments remain vulnerable to changes in Federation Account distributions.
Budget implementation is another concern. The N8.60tn spent by June 2026 represents only 24.4 per cent of the combined approved budgets of the 34 states covered by BudgIT’s analysis.
The debt figures further complicate the situation, as rising obligations and debt servicing costs could limit the resources available for essential services.
WHAT’S BEING SAID
“This is actually not fiscal space, but fiscal illusion,” Dr Iboro Nelson said.
“The ultimate measure of success should not simply be a better fiscal ranking, but better services and improved living conditions,” Joy Ehinor-Esezobor said.
WHAT’S NEXT
State governments face the task of improving budget implementation, strengthening internally generated revenue and directing more resources towards education, healthcare, agriculture, water and sanitation.
BudgIT’s revised assessment framework is expected to place greater emphasis on how effectively states deploy available resources and whether spending produces measurable improvements in citizens’ lives.
BOTTOM LINE
Nigeria’s states are receiving substantially more revenue, but the increase has not translated into equivalent improvements in essential public services. The central challenge is no longer just how much money governments receive, but how effectively they spend it and whether residents can see the results in their daily lives.
