Nigeria’s 36 states received record allocations from the Federation Account (FAAC) in 2024, yet most have failed to translate those funds into measurable improvements in education and healthcare. New BudgIT data reveals that even the wealthiest subnationals lag behind smaller, poorer states in social spending efficiency.
Despite some states generating huge revenues, many fail to prioritise citizen-centric spending, while smaller states achieve better outcomes with limited funds.
“Nigeria’s fiscal federalism has created a structure where most states survive on federal transfers rather than local productivity,” said Gabriel Okeowo, Country Director at BudgIT, in the State of States 2024 report. “High allocations have not translated into better welfare because spending remains skewed toward salaries and capital projects, not human development.”
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According to BusinessDay economists, the welfare index, calculated as the sum of education and health expenditure divided by total revenue, provides a clear measure of how effectively states convert available funds into social impact.
Per capita education and health spending, taken from BudgIT data, further indicate the reach and quality of social services, allowing comparisons between states regardless of size or revenue.
High revenue does not guarantee better welfare.
Lagos State, Nigeria’s commercial hub, received N671 billion from FAAC and generated N1.26 trillion in internally generated revenue. It spent N267.92 billion on education and health, producing a welfare index of 13.86.
Per capita spending stood at N7,864 for education and N8,662 for health. Delta State, with N1.19 trillion from FAAC and N164.58 billion in IGR, invested N166.85 billion in social sectors, yielding a welfare index of 12.3.
“Experts warn that unless states rebalance spending, Nigeria’s high revenue will continue to fail in improving citizen welfare. Greater accountability, transparency, and citizen-focused budgeting are critical, particularly in resource-rich states.”
BusinessDay economists note that these figures show even high-revenue states often struggle to turn funds into meaningful improvements in citizen welfare. Large absolute spending does not automatically translate into better outcomes if budgets prioritise capital projects and administration over people.
“The problem isn’t that states lack money; it’s that budgets don’t prioritise citizens,” said Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), in an interview with BusinessDay. “If education and healthcare continue to receive token allocations, the social dividends of growth will remain invisible.”
Smaller states prioritise social spending.
Some states with modest revenue perform better in welfare outcomes. Ebonyi State, for example, received N112.22 billion from FAAC and N15.23 billion in IGR, yet spent N49.55 billion on education and health. Its welfare index of 38.88 is among the highest in the country. Kogi State, with limited revenue, allocated a significant share to social sectors and achieved a welfare score of 37.94.
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“Ebonyi and Kogi are examples of what fiscal efficiency can look like at the subnational level,” noted Aisha Abdullahi, Senior Economist at the Nigerian Economic Summit Group (NESG), during the 2024 Fiscal Policy Roundtable. “They show that even with modest inflows, deliberate investment in education and health can yield stronger welfare outcomes than revenue-heavy states.”
BusinessDay economists highlight that these examples show fiscal discipline and deliberate prioritisation of human development matter more than sheer revenue. Smaller states can achieve higher welfare outcomes when funds are directed at education and healthcare rather than large capital projects.
Regional differences are clear.
Disparities are visible across regions. In the South-West, Oyo State spent N74.87 billion on education and health from a total expenditure of N402.44 billion, producing a welfare index of 15.25. Lagos, despite higher absolute spending, lags behind. In the South-East, Abia’s N107.11 billion social investment translates into a welfare score of 32.77, while Anambra, spending N30.33 billion, records just 8.62.
Northern states show mixed results. Kaduna and Jigawa, with modest FAAC receipts, achieved welfare indices of 29.19 and 28.05, while Borno State, despite N338.25 billion from FAAC, has one of the lowest welfare scores at 9.45. BusinessDay economists note these differences reflect how well states manage and allocate funds rather than how much money they receive.
Capital projects often overshadow social investment.
Across most states, capital expenditure dominates budgets, often at the expense of education and healthcare. Lagos allocated over N1 trillion to capital projects, more than four times its spending on social sectors.
Delta and Edo States follow similar patterns. Meanwhile, states such as Ebonyi and Kogi dedicate a larger proportion of their budgets to education and health, contributing to higher welfare scores.
Experts warn that unless states rebalance spending, Nigeria’s high revenue will continue to fail in improving citizen welfare. Greater accountability, transparency, and citizen-focused budgeting are critical, particularly in resource-rich states.
Revenue alone does not improve lives.
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The data show that welfare outcomes are not determined by revenue alone. Analysts at BusinessDay observe that improving social conditions requires moving beyond FAAC dependence and capital projects.
Funds must be effectively directed into education, healthcare, and citizen-centric programmes to achieve meaningful improvements in well-being.
Oluwatobi Ojabello, senior economic analyst at BusinessDay.