At least 26 state governments were unable to generate enough internal revenue to cover their personnel costs in 2025, leaving them dependent on allocations from the Federation Account despite a marked improvement in their overall finances.
An analysis by The PUNCH shows that only eight of the 34 states covered by a new BudgIT report generated Internally Generated Revenue exceeding their personnel expenditure during the year. Those eight states were Lagos, Enugu, Ogun, Delta, Kaduna, Kwara, Abia and Anambra.
The remaining 26 states generated about N1.16tn internally but spent approximately N1.91tn on personnel, leaving a combined gap of about N747bn between their IGR and wage-related expenditure.
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 analysed actual figures from states’ full-year budget implementation reports for 2022 and 2025. Akwa Ibom and Rivers were excluded due to incomplete or unavailable data.
The figures do not imply that states are expected to fund salaries exclusively from IGR, since statutory allocations are a legitimate government revenue source. They do, however, illustrate the extent to which many states would struggle to meet even their personnel obligations without funds distributed by the Federation Account Allocation Committee.
Growing Dependence Despite Revenue Gains
This dependence has persisted despite a sharp rise in revenues available to states following the removal of petrol subsidy, foreign exchange reforms, and higher Federation Account receipts.
According to BudgIT, aggregate FAAC allocations rose from N3.43tn in 2022 to N11.38tn in 2025 a 232.06 per cent increase, representing a compound annual growth rate of 50.2 per cent.
IGR also grew substantially, rising from N1.57tn to N4.15tn over the same period, but its 165.01 per cent growth and 38.38 per cent CAGR trailed the expansion in FAAC receipts.
As a result, states have become more dependent on federal transfers even as they generate more revenue internally. FAAC’s share of aggregate state revenue rose from 68.7 per cent in 2022 to 73.3 per cent in 2025, while IGR’s share fell from 31.4 per cent to 26.7 per cent.
BudgIT said this trend showed that “despite improvements in domestic revenue mobilisation, many states remained heavily reliant on transfers from the Federation Account.” It stressed that strengthening domestic revenue mobilisation would be critical to improving states’ long-term fiscal sustainability and reducing reliance on federal transfers.
“Although statutory allocations accounted for a larger share of the overall increase in revenues, strengthening domestic revenue mobilisation remains essential for improving long-term fiscal sustainability and reducing dependence on federal transfers,” the report said.
Wide Disparities Among States
A state-by-state comparison by The PUNCH revealed wide gaps between personnel expenditure and internally generated revenue.
Yobe generated only N15.42bn internally in 2025 but spent N76.34bn on personnel nearly five times its IGR, leaving a shortfall of about N60.91bn. Taraba generated N17.89bn against personnel spending of N55.60bn, meaning its wage bill was more than three times its IGR. Sokoto recorded IGR of N20.58bn against personnel expenditure of N58.65bn, while Adamawa generated N24.14bn internally against a N65.73bn personnel bill.
Jigawa’s personnel expenditure stood at N92.66bn compared with IGR of N35.27bn, while Benue spent N73.94bn on personnel after generating just N29.38bn internally. Similarly, Kogi generated N36.50bn but recorded personnel expenditure of N89.20bn, while Kebbi’s N18.41bn IGR was less than half its N44.82bn personnel spend.
Other states where personnel costs 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 gap among the 26 states, generating N102.52bn internally but spending N170.04bn on personnel a difference of about N67.51bn. Yobe followed with a gap of N60.91bn, and Jigawa recorded N57.39bn. Ondo’s personnel expenditure of N99.58bn exceeded its N45.63bn IGR by N53.94bn, while Kogi’s gap stood at N52.70bn. Bayelsa generated N52.15bn against N98.75bn in personnel spending, leaving a shortfall of N46.60bn.
Some states came much closer to covering their personnel costs internally. Edo generated N98.45bn and spent N99.27bn on personnel a gap of less than N1bn. Gombe generated N36.36bn against personnel expenditure of N53.95bn, while Osun recorded N58.80bn in IGR against N87.46bn in personnel costs.
Improvement Since 2022, But Lagos Skews the Picture
The data showed a slight improvement compared with 2022, when 28 of the 34 states had personnel expenditure exceeding their IGR. Abia, Delta, Enugu and Kwara moved from having IGR below personnel expenditure in 2022 to generating enough internally to cover wage costs by 2025. Ebonyi and Jigawa, however, moved in the opposite direction.
The PUNCH further observed that the underlying weakness in state-level fiscal independence is partly masked by the sheer size of Lagos’s revenue base. Lagos generated N1.85tn in IGR in 2025, up from N656.35bn in 2022 — accounting for about 44 per cent of the N4.15tn generated collectively by the 34 states covered in the report.
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 generated N237.65bn against N151.27bn in personnel costs. Delta recorded N206.44bn in IGR against N197.81bn in personnel expenditure.
Other states whose IGR exceeded personnel costs included Kaduna (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 internally in 2025, against combined personnel expenditure of roughly N2.56tn meaning personnel costs exceeded IGR by about N254bn when Lagos is removed from the equation.
Notable Gains and Declines
Enugu recorded an exceptional surge that boosted the overall IGR figure, with its IGR jumping from N25.12bn in 2022 to N406.77bn in 2025 an increase of N381.66bn and a CAGR of 153.01 per cent, the highest among all states. BudgIT, however, noted that this growth was largely attributable to proceeds collected by the Enugu State Housing Development Corporation from the government’s intervention in the landed property market, and expressed reservations about the classification, citing the potentially cyclical nature of such receipts.
Niger recorded the second-fastest IGR growth, with collections rising from N12.11bn to N66.37bn, while Abia’s IGR grew from N14.67bn to N66.86bn.
Not every state benefited from the IGR expansion, however. Three states recorded lower IGR in 2025 than in 2022. Jigawa suffered the steepest decline, falling from N59.40bn to N35.27bn. Sokoto’s IGR dropped from N23.60bn to N20.58bn, while Ebonyi declined marginally from N23.89bn to N23.25bn.
Jigawa’s situation was particularly notable, as its personnel expenditure rose from N52.37bn in 2022 to N92.66bn in 2025 even as its IGR fell significantly deepening its reliance on other revenue sources.
Calls for Stronger Fiscal Federalism
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 bolster Nigeria’s resilience to economic shocks. He spoke in Owerri, Imo State, at the 2026 National Council on Finance and Economic Development Retreat.
Speaking on the theme ‘Strengthening Fiscal Federalism for Equity, Sustainable Development and Economic Resilience in a Volatile Global Economy,’ Oyedele called for the retreat to interrogate current allocation and derivation principles, while urging greater fiscal responsibility, accountability and cooperation among Nigeria’s three tiers of government to achieve sustainable economic growth. He also urged state governments nationwide to strengthen their IGR, attract investments and create jobs rather than lean heavily on federal allocations.
Also speaking, Imo State Governor Hope Uzodimma represented at the event by his deputy, Chinyere Ekomaru said states must be empowered to generate more revenue and efficiently manage available resources, noting that continued dependence on oil revenue was no longer sustainable.
Economist and former Vice-Chancellor of the University of Uyo, Prof Akpan Ekpo, has said states “have to think of new ways of increasing their IGRs,” urging them to boost revenue by improving service delivery, which he said would attract more income.
Similarly, economist and Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, has argued that a majority of states are not financially sustainable and risk insolvency without a boost in investment.
“This issue is a fiscal sustainability problem, showing that many states are not fiscally sustainable and need to work towards it; and that the states need to do a lot more to attract more investments to their states so that their level of dependence on the Federal Allocation Accounts Committee would reduce,” he said.
He also called on state governors to trim their bloated staff and political appointees. “Most of these states have heavy overhead and they have very bloated bureaucracy, political appointees and they are putting a lot of pressure on their resources, so they have to do some rationalisation on their staff, many of them don’t need more than 50 per cent of their workforce but for political reasons, they put all manner of characters on their payroll including the local government,” he said.
