Revenue generated by 34 Nigerian states increased by 211.2% to N15.53 trillion in 2025, compared with N4.99 trillion in 2022.
However, the World Bank has raised concerns that the substantial increase in government resources has not translated into corresponding improvements in essential public services.
The N10.54 trillion increase was disclosed at the launch of BudgIT’s 2026 State of States Report in Abuja, where policymakers and development experts examined the spending priorities of state governments following recent economic reforms.
According to BudgIT, allocations from the Federation Account Allocation Committee (FAAC) increased by more than 232% to N11.38 trillion from N3.43 trillion during the period.
The increase in revenue followed the removal of petrol subsidies, foreign exchange reforms and improvements in government revenue collection.
However, the World Bank expressed concern that spending on transport infrastructure has expanded considerably faster than investments in education, healthcare and social protection.
Speaking at the report’s presentation, World Bank Senior Economist Gloria Joseph-Raji acknowledged that state governments had increased expenditure on essential services but maintained that the distribution of resources remained a concern, particularly in states with weak human development indicators.
The bank’s assessment showed that education accounted for 12.1% of aggregate state expenditure in 2025, down from 14.9% in 2021, while healthcare spending remained around 7%.
Although capital expenditure increased, the findings raised questions about whether state governments were directing sufficient resources towards improving living standards and strengthening long-term economic productivity.
States Spend Just 24.4% of N35.22 Trillion Budgets
Beyond the allocation of resources, the report identified weak budget implementation as another major challenge.
BudgIT disclosed that states had spent N8.60 trillion by June 2026, representing just 24.4% of their combined approved budgets of N35.22 trillion.
The figures suggest a substantial gap between government spending plans and actual implementation during the first half of the year.
The report also highlighted the continued dependence of state governments on federally distributed revenue despite improvements in internally generated revenue.
According to the World Bank, federation transfers accounted for 73% of aggregate state revenue between 2021 and 2025 when Lagos was excluded.
This dependence leaves many states vulnerable to changes in oil earnings, federal revenue collection and other factors influencing monthly allocations.
Meanwhile, total debt across the 35 states assessed increased by 10.4% to N11.67 trillion in 2025 from N10.57 trillion in 2024.
Lagos accounted for N2.9 trillion of the debt stock, while Osun spent N100.17 billion servicing its obligations, equivalent to 28.6% of its revenue.
Higher Revenue Raises Questions About Economic Impact
The World Bank’s findings highlight a growing challenge for Nigeria’s public finances: converting higher government revenue into measurable economic and social development.
While increased infrastructure spending can support construction, transportation and private-sector activity, inadequate investment in education, healthcare and other essential services could limit long-term productivity.
For businesses and investors, the effectiveness of state government spending is particularly important because public infrastructure, workforce development and service delivery influence operating costs and investment decisions.
The report underscores the need for stronger budget execution, improved internally generated revenue and greater accountability in the management of public funds.
With state governments receiving substantially more resources than in previous years, attention is increasingly shifting from how much revenue they collect to how effectively that revenue supports economic growth, employment and improved living conditions.