Twenty-six of the 34 Nigerian states reviewed by BudgIT relied heavily on allocations from the Federation Account in 2025, as their internally generated revenue (IGR) was insufficient to cover personnel costs.
The finding was contained in BudgIT’s report titled Nigeria’s Economic Reforms: What Has Changed Across Nigeria’s States? An Analysis of State Finances in the Post-Subsidy Years.
According to the report, only eight states—Lagos, Enugu, Ogun, Delta, Kaduna, Kwara, Abia and Anambra—generated enough IGR to meet their personnel expenditure during the year.
The other 26 states collectively generated about N1.16tn in IGR but spent approximately N1.91tn on personnel, leaving a shortfall of about N747bn.
BudgIT analysed actual figures from the full-year budget implementation reports of the states for 2022 and 2025. Akwa Ibom and Rivers were excluded because of incomplete or unavailable data.
The report noted that the figures did not imply that states should fund all their activities from IGR, as statutory allocations remain a legitimate source of government revenue.
However, the widening gap between states’ domestic revenue and personnel obligations underscores their vulnerability to disruptions in federal transfers.
The dependence on federal allocations has increased despite a significant rise in states’ internally generated revenue.
BudgIT said aggregate FAAC allocations increased from N3.43tn in 2022 to N11.38tn in 2025, representing a 232.06 per cent increase.
Over the same period, aggregate IGR rose from N1.57tn to N4.15tn, representing a 165.01 per cent increase.
As a result, FAAC accounted for 73.3 per cent of aggregate state revenue in 2025, compared with 68.7 per cent in 2022.
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 dependent on transfers from the Federation Account.
Lagos significantly influenced the aggregate revenue figures, generating N1.85tn in IGR in 2025, compared with N656.35bn in 2022.
The state’s 2025 IGR accounted for about 44 per cent of the N4.15tn generated collectively by the 34 states reviewed.
Lagos spent N333.67bn on personnel, meaning its internally generated revenue was more than five times its wage bill.
Enugu generated N406.77bn in IGR against personnel expenditure of N56.40bn, while Ogun recorded N237.65bn against N151.27bn in personnel costs.
Delta generated N206.44bn against N197.81bn in personnel expenditure, while Kaduna generated N86.72bn against N77.63bn.
Kwara, Abia and Anambra also recorded IGR above their personnel expenditure.
However, when Lagos was excluded, the remaining 33 states generated about N2.30tn in IGR against combined personnel expenditure of N2.56tn, leaving a deficit of approximately N254bn.
Oyo recorded the largest absolute gap between IGR and personnel expenditure.
The state generated N102.52bn in IGR but spent N170.04bn on personnel, leaving a shortfall of about N67.51bn.
Yobe followed with IGR of N15.42bn against personnel expenditure of N76.34bn, creating a N60.91bn gap.
Jigawa recorded N35.27bn in IGR against N92.66bn in personnel costs, while Ondo generated N45.63bn against personnel expenditure of N99.58bn.
Kogi’s IGR stood at N36.50bn compared with personnel expenditure of N89.20bn, while Bayelsa generated N52.15bn against N98.75bn.
Despite the widespread dependence on FAAC, BudgIT found that the number of states whose personnel expenditure exceeded IGR fell from 28 in 2022 to 26 in 2025.
Abia, Delta, Enugu and Kwara moved from below the personnel-cost threshold in 2022 to above it in 2025.
Edo also came close to balancing its wage bill, generating N98.45bn in IGR against personnel expenditure of N99.27bn.
However, Jigawa and Ebonyi moved in the opposite direction.
Jigawa’s IGR declined from N59.40bn in 2022 to N35.27bn in 2025, while personnel expenditure increased from N52.37bn to N92.66bn.
The findings have renewed calls for states to strengthen their domestic revenue bases, attract investments and reduce their dependence on federal transfers.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, recently called for stronger fiscal federalism, improved revenue generation and economic diversification.
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Economist Prof. Akpan Ekpo also urged states to explore new ways of increasing IGR by improving service delivery and creating conditions that encourage economic activity.
Similarly, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, warned that the fiscal weakness of many states could become a major challenge without stronger investment inflows.
He also criticised bloated bureaucracies and excessive political appointments, arguing that states needed to rationalise their workforces and manage resources more efficiently.
The BudgIT analysis highlights a growing fiscal challenge for Nigeria’s subnational governments: while FAAC allocations have surged following the economic reforms, many states remain unable to generate enough domestic revenue to meet their wage obligations, leaving them dependent on federal transfers.
