Nigerian states have enjoyed a massive increase in public revenues following subsidy removal and economic reforms. But education’s share of government spending is falling, healthcare investment remains relatively flat and billions in approved budgets remain unspent. The World Bank and BudgIT are now questioning whether governors are turning the financial windfall into better lives for their citizens.
The Money Is Growing. Are Citizens Getting Anything Back?
Nigeria’s state governments have a financial opportunity that was difficult to imagine before the removal of the petrol subsidy and the unification of the foreign exchange market. More money is flowing into state treasuries, governments are better positioned to meet salary obligations, and capital expenditure has expanded.
Yet a troubling question is emerging from the country’s public finance data: why is the growth in government revenue not producing a proportionate improvement in the public services that millions of Nigerians depend on?
For a child attending an overcrowded public school, a pregnant woman seeking affordable healthcare or a rural household without reliable access to clean water, an increase in Federation Account Allocation Committee (FAAC) revenue has little immediate meaning unless it changes the conditions in which they live.
That disconnect is at the centre of the World Bank’s latest assessment of state government spending priorities and BudgIT’s 2026 State of States Report.
The findings suggest that Nigeria’s fiscal problem is evolving. The issue is no longer simply whether governments have enough money. Increasingly, it is whether they know how to allocate, manage and convert available resources into lasting public benefits.
At the launch of BudgIT’s 11th State of States Report in Abuja on Tuesday, November 3, Senior Economist at the World Bank Nigeria Office, Gloria Joseph-Raji, warned that investments in transport infrastructure were expanding considerably faster than expenditure on education, healthcare and social protection.
She said:
“Spending on education, health, and social protection has also risen substantially, but it has not kept pace with the rapid growth in transport infrastructure spending, even in states with weaker human capital outcomes.”
The observation raises a fundamental question about the economic priorities of Nigerian governors: are governments building the foundations of productive economies, or concentrating too heavily on physical projects while neglecting the people expected to drive economic growth?
What the World Bank’s Numbers Reveal
The World Bank’s October 2026 Nigeria Development Update, titled Beyond the Federal Purse: How Higher Revenues Reshaped State Priorities, provides a clearer picture of how the additional revenue has influenced government spending.
Between 2023 and 2025, aggregate state revenues increased by approximately 93 per cent in real terms, using 2019 prices.
Expenditure also increased, by approximately 92 per cent.
The increased fiscal capacity allowed states to expand capital expenditure substantially. Capital spending’s share of total expenditure rose from 46 per cent to 61 per cent.
Transport infrastructure accounted for the largest increase, alongside investments in housing, agriculture and other economic infrastructure.
These investments are not inherently undesirable. Roads, bridges and transport networks can reduce business costs, connect agricultural communities to markets, facilitate movement and support private-sector expansion.
For economies struggling with poor connectivity, infrastructure is essential.
The problem is the imbalance.
The World Bank found that education’s share of total state expenditure fell from 14.9 per cent in 2021 to 12.1 per cent in 2025.
Healthcare spending remained broadly stable at approximately 7 per cent, while social protection’s share increased from 1.4 per cent to 4.4 per cent.
Importantly, the declining education share does not mean that the actual amount spent on education fell. The World Bank reported that spending on education, healthcare and social protection increased in absolute terms. The concern is that these sectors have not kept pace with the much faster expansion of economic infrastructure spending.
This distinction matters.
A government can spend more money on education than it did five years ago while education becomes a smaller component of its overall expenditure.
The result is a growing infrastructure portfolio without a corresponding commitment to improving the human capabilities required to sustain economic development.
The World Bank’s position is that states must increasingly direct resources towards sectors that generate broader developmental benefits, particularly education, healthcare and water services.
World Bank Country Director for Nigeria, Mathew Verghis, stressed:
“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.”
He added that spending efficiency, accountability and service delivery would determine whether public resources improved Nigerians’ lives.
₦15.53 Trillion in Revenue, but Where Is the Development?
Figures presented by BudgIT’s Country Director, Vahyala Kwaga, illustrate the scale of the additional resources available to state governments.
According to his comparative analysis, aggregate revenue across 34 states increased from approximately ₦4.99 trillion in 2022 to ₦15.53 trillion in 2025.
That represents an increase of approximately ₦10.54 trillion, or 211 per cent.
FAAC allocations increased even faster, rising from ₦3.43 trillion to ₦11.38 trillion over the same period, representing growth of more than 232 per cent.
These are nominal figures, and should not be confused with the World Bank’s separate inflation-adjusted estimate of 93 per cent real revenue growth between 2023 and 2025.
Nevertheless, both measurements demonstrate the substantial expansion in resources available to state governments.
Kwaga argued that the increased funding should compel Nigerians to look beyond revenue announcements and examine actual government expenditure.
He said:
“We must also examine how effectively they deploy the resources available to them, what they prioritise and whether their spending is delivering the outcomes that citizens need.”
He also challenged governments to demonstrate what the additional resources had actually achieved.
“But what have these additional resources meant for the people of our states? How much of this increased fiscal capacity is finding its way into better public services, stronger infrastructure and improved human development?”
The questions are particularly significant because the revenue growth has been accompanied by continued dependence on federal allocations.
Governors Still Depend Heavily on Abuja
Despite improvements in internally generated revenue, most Nigerian states remain heavily dependent on the Federation Account.
Joseph-Raji disclosed that federation transfers accounted for approximately 73 per cent of aggregate state revenues between 2021 and 2025, excluding Lagos, whose internally generated revenue base is considerably larger.
In 2025, transfers represented more than three-quarters of revenue in all but a handful of states.
Perhaps more revealingly, internally generated revenue was sufficient to cover recurrent expenditure in only two states.
This exposes a structural weakness in the finances of Nigeria’s subnational governments.
A state that depends predominantly on federal transfers has limited control over the timing and scale of its revenue. Changes in oil prices, production levels, federal revenue collections and allocation flows can affect its ability to sustain expenditure.
It also raises questions about the long-term sustainability of government operations.
Nigeria’s revised tax framework has introduced another significant change.
Under Section 81 of the Nigeria Tax Administration Act 2025, the distribution of net VAT revenue is set at 10 per cent for the Federal Government, 55 per cent for state governments and the Federal Capital Territory, and 35 per cent for local governments.
The state and local government portions are further distributed using equality, population and consumption criteria.
The new framework took effect on January 1, 2026.
This creates an additional opportunity for subnational governments, but it does not eliminate the need to develop sustainable local revenue sources.
The World Bank is warning that states must strengthen revenue administration and broaden their tax bases rather than treat larger federal transfers as a permanent substitute for economic productivity.
The ₦8.6 Trillion Budget Execution Problem
The question of whether states are effectively deploying available resources becomes even more pressing when actual expenditure is examined.
BudgIT’s first-half 2026 expenditure analysis, published on October 21, examined 34 states with combined approved budgets of ₦35.22 trillion.
By the end of June, the states had spent only ₦8.60 trillion.
That represented 24.4 per cent of their combined approved budgets.
In monetary terms, ₦26.62 trillion of the approved expenditure remained unspent at the mid-year reporting point.
The differences between states were considerable.
Oyo recorded the highest expenditure performance at 43.4 per cent, followed by Bauchi at 42.6 per cent and Ekiti at 37.9 per cent.
Enugu recorded one of the lowest performances at 10.5 per cent, followed by Cross River at 11.1 per cent.
The figures raise questions about whether governments are preparing realistic budgets, releasing funds on time and managing procurement effectively.
A low mid-year execution rate does not automatically mean that the entire difference represents waste. Capital expenditure can be uneven across the year, and some projects have scheduled payment milestones.
But spending just 24.4 per cent of a full-year approved budget by the end of June deserves serious scrutiny.
The World Bank has identified weaknesses in budget credibility and implementation as part of the problem.
Its October assessment warns that some state budgets set spending targets beyond what governments can realistically finance and implement.
Supplementary budgets and mid-year changes can further undermine budget credibility.
The Bank also highlighted poor coordination between cash-flow forecasts, procurement plans and government spending commitments.
When ministries and agencies commit to projects without confirmed funding, the consequences can include stalled construction, delayed payments and accumulating contractor arrears.
This suggests that Nigeria’s state-level fiscal problem is not exclusively about political priorities. It also involves the technical capacity to plan, finance and execute public investment.
The Human Cost of Underfunded Public Services
The consequences of weak spending priorities become clearer when the figures are examined from the perspective of individual citizens.
At the Abuja event, economist and Amadeus University lecturer Dr Iboro Nelson drew attention to state expenditure on healthcare and education in 2024.
Her figures showed that state governments collectively budgeted ₦1.32 trillion for healthcare but spent only ₦816.64 billion.
That represented approximately 61.9 per cent budget implementation.
For education, states budgeted ₦2.41 trillion but spent ₦1.61 trillion, representing approximately 66.9 per cent implementation.
The per-capita figures were even more revealing.
Average annual state government expenditure amounted to:
- Healthcare: ₦3,483 per resident annually, approximately ₦290 monthly.
- Education: ₦6,981 per resident annually, approximately ₦582 monthly.
These are averages of state-level expenditure spread across the population, not cash payments made directly to individuals. They also do not represent total national spending because federal and local government expenditure and other funding sources are separate.
Nevertheless, the figures demonstrate the scale of the funding challenge at state level.
Nelson described the disconnect between increased public revenue and limited developmental outcomes in particularly strong terms.
“This is actually not fiscal space, but fiscal illusion.”
She attributed the problem to weak budget implementation, unrealistic expenditure projections, overlapping projects and excessive recurrent expenditure.
Her argument points to a distinction that is often missing from political discussions about economic reforms.
Fiscal space is not simply the money appearing in government accounts. It is the money a government can sustainably deploy towards productive investments and essential services after meeting its obligations.
If governments approve ambitious budgets but cannot execute them, or spend heavily without measurable improvements in public welfare, the apparent financial expansion may create a misleading impression of progress.
Lagos Leads, but Debt and Fiscal Transparency Remain Concerns
BudgIT’s 2026 State of States assessment also reveals considerable differences in how individual states manage their finances.
Among the 35 states assessed for 2025, Lagos ranked first in overall fiscal sustainability, followed by Enugu, Bayelsa, Delta and Kebbi.
Cross River ranked last.
Lagos generated ₦1.71 trillion in internally generated revenue in 2025, reinforcing its advantage over states that depend predominantly on federal transfers.
Enugu recorded a striking 125.91 per cent increase in internally generated revenue, from ₦180.5 billion in 2024 to ₦407.76 billion in 2025.
However, BudgIT noted that non-tax receipts accounted for 90.79 per cent of the absolute increase in Enugu’s IGR, raising questions about the recurring strength of that growth.
The debt figures also deserve attention.
Total debt across the 35 assessed states increased by 10.41 per cent, from ₦10.57 trillion in 2024 to ₦11.67 trillion in 2025.
Lagos had the highest debt stock at approximately ₦2.9 trillion.
Osun spent ₦100.17 billion servicing its debt, equivalent to 28.6 per cent of its total revenue.
The Lagos result illustrates why debt sustainability cannot be measured by the size of outstanding debt alone. Revenue generation, repayment capacity and other fiscal obligations are equally important.
The report’s exclusion of Rivers State is another significant issue.
BudgIT said Rivers could not be included because the necessary 2025 audited financial statements and budget implementation reports were unavailable.
The 2026 assessment therefore covers 35 states rather than the entire federation.
The omission is not evidence of financial wrongdoing. It does, however, demonstrate how inadequate public financial disclosure can prevent independent examination of government performance.
A state whose finances cannot be independently assessed cannot be meaningfully compared with others.
Are Fiscal Rankings Measuring What Citizens Actually Experience?
BudgIT’s revised methodology attempts to shift attention towards development spending.
The assessment now considers revenue performance, fiscal viability, debt sustainability and expenditure in selected critical sectors, including agriculture, health, education, water and sanitation.
However, its scoring framework assigns 40 per cent to revenue performance, 30 per cent to fiscal viability, 15 per cent to debt sustainability and 15 per cent to spending in selected critical sectors.
This is a useful improvement on assessments that concentrate almost exclusively on revenue and debt.
But it also highlights an important limitation: a state can demonstrate strong fiscal performance without necessarily delivering the best public services.
Spending on education is not the same as improved learning outcomes.
Healthcare allocations are not proof of functioning primary healthcare centres.
Money budgeted for water projects does not establish that households have access to safe drinking water.
The next stage of fiscal accountability must therefore connect public expenditure to independently verifiable results.
How many classrooms were built and equipped? How many teachers are employed and present? How many primary healthcare facilities operate consistently? How many communities have functioning water systems?
These are the questions that should accompany the publication of every major state budget.
Programme Manager at the Ford Foundation’s West Africa Office, Joy Ehinor-Esezobor, made a similar argument.
She said:
“The ultimate measure of success should not simply be a better fiscal ranking, but better services and improved living conditions.”
Her warning is especially relevant as state governments prepare subsequent budgets and political attention gradually turns towards the 2027 elections.
The temptation to prioritise projects with immediate visibility must not outweigh investments in education, healthcare, agriculture, sanitation and social protection.TheCable+1
Nigeria’s Next Fiscal Test Is What Governors Deliver
Nigeria’s recent economic reforms have expanded the financial resources available to state governments.
The World Bank acknowledges that additional revenue has helped states meet salary obligations, expand infrastructure investment and strengthen their fiscal positions.
That is a genuine improvement.
But the economic value of these reforms cannot be judged solely by how much money governments receive from Abuja or how quickly their annual budgets expand.
The more important question is whether citizens can identify tangible improvements in their everyday lives.
State governments must strengthen domestic revenue generation, reduce excessive administrative expenditure, improve cash management and ensure that borrowing finances productive investments.
They must also make budget implementation reports, audited financial statements, procurement records and project details accessible to citizens.
The National Assembly and state legislatures have a responsibility to scrutinise spending, while civil society organisations and journalists must independently verify whether public projects are completed and functioning.
For investors, the implications extend beyond public accountability.
States with credible budgets, sustainable revenue bases, transparent procurement and reliable infrastructure are better positioned to attract private investment and support local businesses.
Conversely, weak budget execution and poorly managed public finances can undermine investor confidence, weaken local economies and increase the cost of doing business.
The real test of Nigeria’s revenue boom is therefore not the number of roads commissioned, the size of annual allocations or the position of a state on a fiscal league table.
It is whether a child has access to a functioning school, whether a patient can receive affordable treatment and whether a community can depend on safe water.
Nigeria’s governors have received more money.
The question now is whether Nigerians will finally receive more government.
Follow us on our broadcast channels today!
- WhatsApp: https://whatsapp.com/channel/0029VawZ8TbDDmFT1a1Syg46
- Telegram: https://t.me/atlanticpostchannel
- Facebook: https://www.messenger.com/channel/atlanticpostng
Join the debate; let’s know your opinion.