The World Bank has disclosed that 26 Nigerian states increased their spending faster than their revenue between 2023 and 2025. This development raises concerns about the sustainability of their spending and the need for better financial management. According to the World Bank's October 2026 Nigeria Development Update, titled Beyond the Federal Purse: How Higher Revenues Shaped State Priorities, Abia, Kaduna, Benue, and Gombe recorded some of the widest gaps between revenue growth and expenditure during the period.
The report noted that the median growth in state spending was about 134 percent in real terms between 2023 and 2025, while revenue grew by 79 percent. Six states, however, recorded faster revenue growth than spending. They were Akwa Ibom, Enugu, Kano, Katsina, Niger, and Taraba. Ekiti and Ogun recorded almost equal growth rates in revenue and expenditure. The report also found that there was no clear geographical or economic pattern in the spending decisions made by the states.
The World Bank's findings come amid a significant increase in the revenue available to Nigerian states, although their ability to generate money internally remains different. In October 2026, Nairametrics reported that state government revenue increased by 93 percent in real terms between 2023 and 2025, while expenditure rose by 92 percent. The World Bank also found that capital expenditure increased from 46 percent to 61 percent of total state spending.
The increase in state spending followed a rise in the revenue available to state governments after the removal of the petrol subsidy, foreign exchange reforms, and improvements in tax collection. The World Bank reported that gross federation revenue increased by 69 percent in real terms between 2023 and 2025, while the amount available for distribution among the three tiers of government rose by 60 percent. State governments benefited the most from the increase.
State governments' share of distributable federation revenue grew by about 129.5 percent in real terms, from N3.21 trillion in 2023 to N7.37 trillion in 2025, using 2019 prices. Spending on transport rose sharply from about N100 billion in 2021 to N2.5 trillion in 2025, representing 26.5 percent of total state expenditure. States also increased spending on education, healthcare, housing, agriculture, and social protection.
Infrastructure recorded the biggest increase in spending priority. Nigeria's 36 states and the Federal Capital Territory generated N5.15 trillion in internally generated revenue (IGR) in 2025, representing a 40.93 percent increase from the N3.65 trillion recorded in 2024. Lagos, Rivers, and Enugu were the three highest revenue-generating states, contributing a combined N2.60 trillion. Lagos alone accounted for 34.4 percent of the total revenue generated internally.
The World Bank's report examined how state governments used the additional funds they received following major economic reforms. The report's findings highlight the need for better financial management and sustainability in state spending. The World Bank's disclosure provides valuable insights into the financial management of Nigerian states and the impact of economic reforms on their revenue and spending.
Key points
- 26 Nigerian states increased spending faster than revenue between 2023 and 2025.
- The median growth in state spending was about 134 percent in real terms between 2023 and 2025.
- State governments' share of distributable federation revenue grew by about 129.5 percent in real terms between 2023 and 2025.
