KEY POINTS
• Nigeria’s 36 states recorded a 93 per cent increase in aggregate revenue in real terms between 2023 and 2025, according to the World Bank.
• Education’s share of state expenditure fell from 14.9 per cent in 2021 to 12.1 per cent in 2025, although actual spending on education increased.
• Capital expenditure rose to 61 per cent of total state spending, while social protection’s share increased to 4.4 per cent.
MAIN STORY
Nigeria’s state governments directed a growing proportion of public spending towards infrastructure between 2023 and 2025, while education expenditure grew more slowly than overall spending, according to the World Bank’s latest Nigeria Development
The report, titled Beyond the Federal Purse: How Higher Revenues Reshaped State Priorities, found that aggregate state revenue increased by about 93 per cent in real terms over the two years, while expenditure rose by 92 per cent.
The increase in available funds followed economic reforms, including petrol subsidy removal and exchange rate changes, alongside stronger revenue administration and higher allocations from the Federation Account. States also benefited from refunds, settlements of outstanding federal obligations, intervention funds and increased Value Added Tax collections.
Despite the additional revenue, education accounted for 12.1 per cent of total state expenditure in 2025, down from 14.9 per cent in 2021. The World Bank said, however, that actual spending on education rose substantially in real terms, but did not keep pace with the growth in expenditure on economic infrastructure.
Health spending also increased in real terms, although its share of state expenditure remained broadly stable at about seven per cent. Social protection recorded a larger increase in its budget share, rising from 1.4 per cent in 2021 to 4.4 per cent in 2025.
Capital expenditure accounted for 61 per cent of state spending, compared with 46 per cent previously. Transport infrastructure recorded the largest increase, while spending on housing, agriculture and other economic investments also grew.
Mathew Verghis, the World Bank’s Country Director for Nigeria, said the increase in state revenues created an opportunity to improve infrastructure and essential services, but warned that better spending efficiency and accountability would be necessary to turn additional resources into improved living conditions.
“The bold macroeconomic reforms have substantially increased fiscal revenues at the state level, providing a unique opportunity to improve infrastructure, education, healthcare, and water services, which are critical to creating more and better jobs. Strengthening spending efficiency, accountability, and service delivery will be essential to ensuring that public resources improve the lives of Nigerians,” Verghis said.
The report also noted progress in states’ fiscal reporting, transparency and internally generated revenue. It called for more efficient spending and stronger investment in human capital to help translate economic reforms into employment opportunities and better living standards.
The World Bank projected that Nigeria’s economy would grow by an average of 4.4 per cent between 2026 and 2028, with the outlook dependent on sustained reforms and improvements in public service delivery.
THE ISSUES
- The decline in education’s share of state expenditure does not mean that states spent less money on education in absolute terms. The World Bank says education spending increased in real terms, but more slowly than spending on economic infrastructure. The distinction matters when assessing whether states are increasing education funding sufficiently to keep pace with their expanding budgets.
- The growing share of capital expenditure points to a shift towards infrastructure investment. Transport recorded the largest increase, but the share of capital spending alone does not establish whether individual projects were completed efficiently or delivered the expected benefits.
- Health spending’s share remained broadly stable while social protection took up a larger proportion of state expenditure. The different trends indicate that the additional fiscal space did not affect all categories of public spending equally.
- The report’s central concern is how effectively states convert increased revenue into public services and improved living standards. Stronger fiscal reporting and higher revenue collections create opportunities, but accountability, spending efficiency and service delivery remain important to achieving better outcomes.
WHAT’S BEING SAID
“The bold macroeconomic reforms have substantially increased fiscal revenues at the state level, providing a unique opportunity to improve infrastructure, education, healthcare, and water services, which are critical to creating more and better jobs. Strengthening spending efficiency, accountability, and service delivery will be essential to ensuring that public resources improve the lives of Nigerians.” – Mathew Verghis, World Bank Country Director for Nigeria
WHAT’S NEXT
The World Bank has urged states to improve spending efficiency, strengthen accountability and use their increased fiscal resources to improve infrastructure and essential services. Its economic outlook also depends on sustained reforms and better public service delivery.
BOTTOM LINE
Nigeria’s states collected substantially more revenue between 2023 and 2025 and increased spending on education, health and social protection. However, infrastructure spending grew faster, reducing education’s share of total expenditure and leaving states with the challenge of ensuring that higher revenues translate into better public services.
