In 26 of the 34 Nigerian states with data, spending grew faster than revenue from 2023 to 2025, though the states’ combined books roughly kept pace, the World Bank says.
The World Bank says spending grew faster than revenue in 26 of the 34 Nigerian states with available data between 2023 and 2025, after reforms sharply raised the money flowing to state governments. The finding comes from the bank’s Nigeria Development Update of October 2026, its twice-yearly country economic report, titled Beyond the Federal Purse.
What the World Bank Found
The World Bank compared growth in what each state spent with growth in what it earned from 2023 to 2025, for the 34 states with available data. All figures are in real terms, meaning adjusted to 2019 prices so that inflation does not distort them; in 26 of the states, spending grew faster.
Abia, Kaduna, Benue and Gombe, all Nigerian states, showed particularly large gaps. Six states (Akwa Ibom, Enugu, Kano, Katsina, Niger and Taraba) saw revenue grow faster than spending, while Ekiti and Ogun grew at similar rates.
The typical, or median, state raised spending by about 134% in real terms, compared with about 79% for revenue. The World Bank says the groups did not follow a clear geographic or economic pattern.
Why State Budgets Grew So Fast
Reforms since 2023, including unifying exchange rates, removing the petrol subsidy and stronger tax administration, raised gross federation revenues, the money collected nationally for sharing among governments, by 69% in real terms. Net distributable revenues, what remains for sharing after first-line deductions, rose 60%, and states received a large part of the gain through higher transfers, refunds and the settlement of old federal obligations.
Because much of the gain came from oil-related income and repayments of old arrears, oil-producing states benefited disproportionately, the report says. That widened fiscal gaps between states.
An aerial view of Abuja’s Central Business District, in an April 2024 photo. Photo: Shadygaz / Wikimedia Commons (CC BY-SA 4.0)Where the Money Went
States put most of the extra money into building. Capital spending, which covers roads and other projects, rose by about 151% in real terms, and its share of state spending climbed from about 48% to 61%.
Transport became one of the largest items, at 26.5% of all state spending in 2025. Education fell from 14.9% of spending in 2021 to 12.1% in 2025, and health from 7.4% to 7.1%, although both rose in absolute terms.
The Revenue Risk
Federation transfers, the money states receive from the shared national pool, made up 65% of combined state revenue across 2021 to 2025. Revenue that states raise themselves, known as internally generated revenue, grew 55% in real terms between 2023 and 2025, less than the 69% rise in gross federation revenues.
Only Lagos and Enugu raised enough on their own in 2025 to cover their running costs, the report says. If federally collected revenues suffer a setback, most states could not cover day-to-day costs from their own revenue.
What It Means for You
Nigeria’s state governments carry primary or shared responsibility for schools, clinics and roads. Anyone dealing with a state government, from lenders to contractors, will want to know how far it relies on federal transfers rather than its own taxes.
For more on the economy behind these budgets, see our reports on President Tinubu’s use of the World Bank growth report, the push for private financing and the state police vote. Our Nigeria coverage tracks the national picture.
What Is Not Known
Faster spending growth does not by itself mean a deficit, because states started from different levels of revenue and spending. The comparison covers the 34 states with data, and whether the extra spending improves schools, clinics and roads is not yet measurable.
Frequently Asked Questions
How many Nigerian states spent faster than their revenue grew?
Twenty-six of the 34 states with available data, between 2023 and 2025 in real terms. Six states saw revenue grow faster, and two grew at similar rates.
Does this mean Nigerian states are running deficits?
Not necessarily, because the finding compares growth rates, not budget balances. Combined, state revenue rose about 93% and spending about 92% over the period.
Where did Nigerian states spend the extra money?
Mostly on capital projects, especially transport. Capital spending’s share of state budgets rose from about 48% to 61%.
Sources: World Bank, Nigeria Development Update, October 2026: Beyond the Federal Purse, How Higher Revenues Shaped State Priorities (https://documents1.worldbank.org/curated/en/099100726183025290/pdf/P513192-9694adf7-8564-447a-8518-63636f20d2c6.pdf; summary page https://www.worldbank.org/en/country/nigeria/publication/nigeria-development-update-ndu), read 9 November 2026.
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