A report by BudgIT reveals that 26 out of 34 evaluated Nigerian states failed to generate enough internal revenue to cover personnel costs in 2025. Despite substantial financial reforms and the removal of petrol subsidies, subnational governments remain heavily reliant on federal allocations.

Revenue Growth Versus Federal Dependence

Aggregate Federation Account Allocation Committee (FAAC) distributions surged by 232.06 percent, growing from N3.43tn in 2022 to N11.38tn in 2025. Internally Generated Revenue (IGR) also grew by 165.01 percent, moving from N1.57tn to N4.15tn during the same period. However, IGR growth lagged behind federal transfers, causing the federal share of aggregate state revenue to increase from 68.7 percent to 73.3 percent, while IGR's share declined from 31.4 percent to 26.7 percent.

State-by-State Fiscal Disparities

Only eight states generated enough IGR to cover their personnel expenditures in 2025: Lagos, Enugu, Ogun, Delta, Kaduna, Kwara, Abia, and Anambra.

• Lagos State: Generated N1.85tn in IGR while spending N333.67bn on personnel, accounting for roughly 44 percent of total national IGR across the 34 analyzed states.

• Enugu State: Experienced a dramatic rise in IGR to N406.77bn against a personnel cost of N56.40bn, driven largely by property market interventions through its housing development corporation.

• Oyo State: Recorded the largest absolute deficit among the 26 dependent states, generating N102.52bn against a personnel expenditure of N170.04bn.

• Yobe State: Faced a severe gap where personnel costs were nearly five times its internal revenue, generating N15.42bn against a N76.34bn personnel bill.

The remaining 26 states combined generated N1.16tn internally while spending approximately N1.91tn on wages, leaving a collective shortfall of N747bn. Excluding Lagos, the remaining 33 states collectively spent N2.56tn on personnel against an aggregate IGR of N2.30tn.

Expert Recommendations and Fiscal Reform

Financial authorities and economists emphasize that long-term fiscal stability requires aggressive domestic revenue mobilization and structural reforms. Proposed solutions include:

• Enhancing service delivery to attract private investment and expand local economic activity.

• Re-evaluating allocation and derivation principles to promote fiscal equity.

• Rationalizing bloated state bureaucracies, political appointments, and redundant workforces to relieve pressure on public funds.