ABUJA, Nigeria — At least 26 of 34 Nigerian states could not generate enough Internally Generated Revenue (IGR) to cover personnel costs in 2025, underscoring their continued dependence on federal allocations despite a sharp rise in public revenues.

The states collectively generated about N1.16 trillion in IGR but spent N1.91 trillion on personnel, leaving a N747 billion gap, according to BudgIT’s 2026 analysis of state finances.

An analysis of state finances contained in BudgIT’s 2026 report showed that only eight of the 34 states with available data generated more IGR than they spent on personnel in 2025.

Only Lagos, Enugu, Ogun, Delta, Kaduna, Kwara, Abia and Anambra generated enough IGR to cover their personnel expenditure.

The findings highlight a persistent weakness in Nigeria’s subnational finances: while state revenues have surged since the removal of the petrol subsidy and other economic reforms, federal transfers have grown faster than internally generated revenue, leaving many states reliant on the Federation Account to meet basic recurrent obligations.

The remaining 26 states collectively generated about N1.16 trillion in IGR, against approximately N1.91 trillion in personnel expenditure, leaving a financing gap of roughly N747 billion.

The findings are contained in BudgIT’s report, Nigeria’s Economic Reforms: What Has Changed Across Nigeria’s States? An Analysis of State Finances in the Post-Subsidy Years, which examined actual figures from states’ full-year budget implementation reports for 2022 and 2025.

Akwa Ibom and Rivers were excluded because complete or comparable data were unavailable.

FAAC Revenue Rises Faster Than State IGR

The figures do not mean state governments are expected to finance salaries solely from IGR. Statutory allocations from the Federation Account are a legitimate and important source of subnational government revenue.

However, the data illustrate the extent to which many states remain dependent on federal transfers to meet basic recurrent obligations, including salaries and other personnel costs.

That dependence has persisted even as the amount of money available to states has increased substantially following the removal of the petrol subsidy, foreign-exchange reforms and higher Federation Account revenues.

According to BudgIT, aggregate allocations to states from the Federation Account Allocation Committee (FAAC) increased from N3.43 trillion in 2022 to N11.38 trillion in 2025.

That represents a 232.06 per cent increase, equivalent to a compound annual growth rate of about 50.2 per cent.

State IGR also expanded significantly, rising from N1.57 trillion in 2022 to N4.15 trillion in 2025, a 165.01 per cent increase.

But the growth in IGR, with a compound annual growth rate of 38.38 per cent, lagged the expansion in FAAC receipts.

As a result, the composition of state revenues became even more dependent on federal transfers.

FAAC accounted for 68.7 per cent of aggregate state revenue in 2022, but its share increased to 73.3 per cent in 2025. Meanwhile, the contribution of IGR declined from 31.4 per cent to 26.7 per cent.

BudgIT said the trend demonstrated that, despite improvements in domestic revenue mobilisation, many states remained heavily reliant on Federation Account transfers.

The fiscal-policy organisation warned that stronger domestic revenue mobilisation would be critical to improving the long-term financial sustainability of state governments.

Wage Pressures Expose Fiscal Weakness

The gap between IGR and personnel costs was particularly pronounced in several states.

In Yobe, for instance, IGR stood at only N15.42 billion in 2025, while personnel expenditure reached N76.34 billion. The state’s wage bill was therefore almost five times its internally generated revenue, leaving a gap of approximately N60.91 billion.

Taraba generated N17.89 billion in IGR against personnel expenditure of N55.60 billion, while Sokoto generated N20.58 billion against N58.65 billion in personnel costs.

In Adamawa, IGR was N24.14 billion compared with personnel expenditure of N65.73 billion.

Jigawa generated N35.27 billion internally but spent N92.66 billion on personnel, while Benue recorded N29.38 billion in IGR against N73.94 billion in personnel expenditure.

Other states where personnel costs exceeded IGR included Kogi, Kebbi, 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 personnel funding gap among the 26 states.

The state generated N102.52 billion in IGR but spent N170.04 billion on personnel, producing a gap of about N67.51 billion.

Yobe followed with a N60.91 billion gap, while Jigawa recorded N57.39 billion.

Ondo’s N99.58 billion personnel bill exceeded its N45.63 billion IGR by approximately N53.94 billion, while Kogi had a gap of N52.70 billion.

Bayelsa generated N52.15 billion internally against personnel expenditure of N98.75 billion, leaving a shortfall of N46.60 billion.

Lagos Masks Broader State-Level Weakness

The aggregate numbers also conceal a significant disparity between Nigeria’s states, particularly because of Lagos’ exceptional revenue base.

Lagos generated approximately N1.85 trillion in IGR in 2025, up from N656.35 billion in 2022.

Its IGR alone represented about 44 per cent of the N4.15 trillion generated collectively by the 34 states covered by the BudgIT analysis.

The state spent N333.67 billion on personnel, meaning its internally generated revenue was more than five times its personnel expenditure.

Other states that generated more IGR than personnel expenditure included Enugu, which recorded N406.77 billion in IGR against N56.40 billion in personnel costs; Ogun, with N237.65 billion against N151.27 billion; and Delta, with N206.44 billion against N197.81 billion.

Kaduna generated N86.72 billion compared with N77.63 billion in personnel costs, while Kwara recorded N85.21 billion against N65.22 billion.

Abia generated N66.86 billion compared with personnel expenditure of N62.26 billion, while Anambra generated N54.24 billion against N39.95 billion.

The concentration of revenue in Lagos means the overall IGR picture is considerably stronger than that of the typical Nigerian state.

Excluding Lagos, the other 33 states generated approximately N2.30 trillion in IGR in 2025, against combined personnel expenditure of about N2.56 trillion.

That left a personnel funding gap of approximately N254 billion.

Some States Improve, Others Fall Behind

The situation nevertheless represents a modest improvement from 2022.

In that year, 28 of the 34 states analysed had personnel expenditure above their IGR. By 2025, the number had fallen to 26.

Abia, Delta, Enugu and Kwara moved from having personnel costs above IGR in 2022 to generating sufficient internal revenue to cover their personnel expenditure in 2025.

However, Ebonyi and Jigawa moved in the opposite direction.

Enugu recorded the most dramatic increase in IGR, rising from N25.12 billion in 2022 to N406.77 billion in 2025.

The N381.66 billion increase represented a compound annual growth rate of approximately 153 per cent, the highest among the states analysed.

BudgIT, however, cautioned that much of Enugu’s increase was linked to proceeds collected by the Enugu State Housing Development Corporation following government intervention in the landed-property market.

The organisation questioned aspects of the classification and warned that such receipts could have a cyclical rather than sustainable character.

Niger recorded the second-fastest increase, with IGR rising from N12.11 billion to N66.37 billion, while Abia’s IGR increased from N14.67 billion to N66.86 billion.

Jigawa Highlights the Fiscal Challenge

Jigawa presents one of the clearest examples of the pressure confronting several states.

Its IGR fell from N59.40 billion in 2022 to N35.27 billion in 2025, while personnel expenditure rose from N52.37 billion to N92.66 billion over the same period.

The combination of falling domestic revenue and rising personnel costs substantially widened the state’s dependence on other revenue sources, including federal allocations.

Only three of the 34 states recorded lower IGR in 2025 than in 2022: Jigawa, Sokoto and Ebonyi.

Calls Grow for Stronger Fiscal Federalism

The findings have renewed calls for Nigerian states to improve their domestic revenue bases, attract private investment and reduce dependence on federal transfers.

Finance Minister and Coordinating Minister of the Economy, Taiwo Oyedele, recently called for stronger fiscal federalism, improved revenue generation and economic diversification to make Nigeria more resilient to economic shocks.

Oyedele made the call in Owerri, Imo State, at the 2026 National Council on Finance and Economic Development Retreat, whose theme was Strengthening Fiscal Federalism for Equity, Sustainable Development and Economic Resilience in a Volatile Global Economy.

He called for a review of Nigeria’s allocation and derivation principles while urging the three tiers of government to strengthen fiscal responsibility, accountability and cooperation.

The minister also urged state governments to improve IGR, attract investments and create jobs instead of relying excessively on federal allocations.

Imo State Governor Hope Uzodimma, represented at the event by his deputy, Chinyere Ekomaru, similarly argued that states must be empowered to raise more revenue and improve the efficiency of public spending.

He warned that continued dependence on oil revenues was no longer sustainable.

Economist and former Vice-Chancellor of the University of Uyo, Prof. Akpan Ekpo, has also urged states to develop new approaches to expanding their revenue bases, arguing that improved public services could help attract economic activity and generate additional revenue.

Meanwhile, Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise, described the situation as a fiscal sustainability problem.

He said many states remained financially vulnerable and needed to attract substantially more investment to reduce their dependence on FAAC.

Yusuf also called for tighter control of recurrent expenditure, arguing that bloated bureaucracies, excessive political appointments and large payrolls were placing additional pressure on state finances.

Fiscal Sustainability Becomes the Next Test

Nigeria’s post-subsidy fiscal environment has delivered a substantial increase in resources available to state governments. But the BudgIT data suggest that higher allocations have not automatically translated into greater fiscal independence.

For many states, the central challenge is no longer simply raising more money but building sustainable domestic revenue streams while controlling recurrent expenditure and creating an environment capable of attracting private investment.

Without such changes, rising FAAC allocations could continue to mask underlying weaknesses in state finances, leaving many subnational governments exposed to future declines in oil revenues, economic shocks or changes in federal revenue-sharing arrangements.

The widening gap between federal transfers and internally generated revenue therefore places fiscal diversification, investment mobilisation and expenditure discipline at the centre of Nigeria’s longer-term state-finance challeng