At least 26 of Nigeria’s 34 states covered by a recent fiscal report generated less Internally Generated Revenue than they spent on personnel in 2025, underscoring their continued dependence on federal allocations to meet recurrent obligations.
The analysis, based on figures compiled by BudgIT, showed that only eight states—Lagos, Enugu, Ogun, Delta, Kaduna, Kwara, Abia and Anambra—generated sufficient IGR to cover their personnel expenditure during the year.
The 26 states collectively generated about N1.16tn internally but spent approximately N1.91tn on salaries and other personnel-related obligations, resulting in a shortfall of about N747bn.
The findings are contained in BudgIT’s 2026 report, titled ‘Nigeria’s Economic Reforms: What Has Changed Across Nigeria’s States? An Analysis of State Finances in the Post-Subsidy Years’.
The report examined actual figures from states’ full-year budget implementation reports for 2022 and 2025. Akwa Ibom and Rivers were excluded because of incomplete or unavailable data.
Although states are not expected to fund salaries solely from IGR, the figures highlight the extent of their reliance on statutory allocations from the Federation Account to meet personnel obligations.
The dependence has persisted despite a significant increase in revenues available to the states following the removal of petrol subsidy, foreign exchange reforms and increased Federation Account receipts.
According to BudgIT, aggregate FAAC allocations to states rose from N3.43tn in 2022 to N11.38tn in 2025, representing a 232.06 per cent increase and a compound annual growth rate of 50.2 per cent.
IGR also increased from N1.57tn to N4.15tn within the period, representing a 165.01 per cent rise and a 38.38 per cent compound annual growth rate.
However, FAAC receipts grew faster than internally generated revenue, increasing the states’ reliance on federal transfers.
FAAC accounted for 68.7 per cent of aggregate state revenue in 2022 but rose to 73.3 per cent in 2025. Conversely, the contribution of IGR declined from 31.4 per cent to 26.7 per cent.
BudgIT said the trend showed that “despite improvements in domestic revenue mobilisation, many states remained heavily reliant on transfers from the Federation Account.”
It stressed that stronger domestic revenue mobilisation would be crucial to improving the long-term fiscal sustainability of the states.
A state-by-state assessment showed significant disparities.
Yobe recorded the widest gap relative to its IGR, generating N15.42bn internally while spending N76.34bn on personnel. Taraba generated N17.89bn against personnel expenditure of N55.60bn, while Sokoto generated N20.58bn compared with N58.65bn in personnel costs.
Adamawa’s IGR stood at N24.14bn, against personnel expenditure of N65.73bn. Jigawa generated N35.27bn but spent N92.66bn on personnel, while Benue recorded N29.38bn in IGR against N73.94bn in personnel expenditure.
Kogi generated N36.50bn and spent N89.20bn on personnel, while Kebbi’s N18.41bn IGR was less than half of its N44.82bn personnel bill.
Other states whose personnel expenditure exceeded IGR included Bauchi, Bayelsa, Borno, Cross River, Ebonyi, Edo, Ekiti, Gombe, Imo, Kano, Katsina, Nasarawa, Niger, Ondo, Osun, Oyo, Plateau and Zamfara.
In absolute terms, Oyo recorded the largest shortfall, generating N102.52bn internally against personnel expenditure of N170.04bn, leaving a gap of about N67.51bn.
Yobe followed with a N60.91bn gap, while Jigawa recorded N57.39bn. Ondo’s personnel expenditure of N99.58bn exceeded its N45.63bn IGR by N53.94bn, while Kogi recorded a N52.70bn gap.
Bayelsa generated N52.15bn internally but spent N98.75bn on personnel, resulting in a N46.60bn shortfall.
However, some states came close to financing their personnel obligations from IGR. Edo generated N98.45bn against personnel expenditure of N99.27bn, leaving a gap of less than N1bn.
Gombe generated N36.36bn compared with personnel expenditure of N53.95bn, while Osun recorded N58.80bn in IGR against personnel costs of N87.46bn.
The situation represents a modest improvement from 2022, when 28 of the 34 states had personnel expenditure higher than their IGR.
Abia, Delta, Enugu and Kwara moved from the deficit group in 2022 to generating enough IGR to cover personnel costs in 2025. Ebonyi and Jigawa, however, moved in the opposite direction.
Lagos continued to dominate the aggregate IGR figures, generating N1.85tn in 2025, up from N656.35bn in 2022.
Its IGR accounted for about 44 per cent of the N4.15tn generated collectively by the 34 states.
Lagos spent N333.67bn on personnel, meaning its IGR was more than five times its personnel expenditure.
Enugu generated N406.77bn against personnel expenditure of N56.40bn, while Ogun recorded N237.65bn in IGR against N151.27bn in personnel costs.
Delta generated N206.44bn internally compared with N197.81bn spent on personnel.
Other states whose IGR exceeded their personnel expenditure were Kaduna, with N86.72bn against N77.63bn; Kwara, N85.21bn against N65.22bn; Abia, N66.86bn against N62.26bn; and Anambra, N54.24bn against N39.95bn.
Excluding Lagos, the remaining 33 states generated about N2.30tn in IGR in 2025, while their combined personnel expenditure stood at roughly N2.56tn, representing a shortfall of about N254bn.
Enugu also recorded the highest IGR growth during the period, rising from N25.12bn in 2022 to N406.77bn in 2025—an increase of N381.66bn and a compound annual growth rate of 153.01 per cent.
BudgIT, however, attributed much of the increase to proceeds collected by the Enugu State Housing Development Corporation following government intervention in the landed property market, while expressing reservations over the classification and potentially cyclical nature of the receipts.
Niger recorded the second-fastest growth, with IGR rising from N12.11bn to N66.37bn, while Abia increased from N14.67bn to N66.86bn.
Jigawa recorded the sharpest decline, with IGR falling from N59.40bn in 2022 to N35.27bn in 2025. Sokoto’s IGR dropped from N23.60bn to N20.58bn, while Ebonyi declined marginally from N23.89bn to N23.25bn.
Jigawa’s position was particularly concerning as its personnel expenditure increased from N52.37bn to N92.66bn during the period, even as its IGR declined.
The report comes amid renewed calls for greater fiscal independence among the states.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, recently called for stronger fiscal federalism, improved revenue generation and economic diversification to shield the country from economic shocks.
Oyedele spoke in Owerri, Imo State, at the 2026 National Council on Finance and Economic Development Retreat, themed, ‘Strengthening Fiscal Federalism for Equity, Sustainable Development and Economic Resilience in a Volatile Global Economy.’
He urged stakeholders to review the existing allocation and derivation principles while advocating greater fiscal responsibility, accountability and cooperation among the three tiers of government.
The minister also urged states to strengthen their IGR, attract investments and create jobs rather than depend excessively on federal allocations.
Similarly, the Imo State Governor, Hope Uzodimma, represented by his deputy, Chinyere Ekomaru, said states must be empowered to generate more revenue and efficiently manage available resources, stressing that dependence on oil revenue was no longer sustainable.
An economist and former Vice-Chancellor of the University of Uyo, Prof. Akpan Ekpo, also called on states to explore new ways of increasing IGR through improved service delivery.
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, warned that many states were not financially sustainable and could face insolvency without increased investment.
Yusuf urged governors to attract more investments and reduce the size of their workforce and political appointments.
He said bloated bureaucracies, excessive political appointments and heavy overhead costs were placing additional pressure on state finances, stressing the need for rationalisation of personnel and expenditure.
Credit: Punch