Spending Outpaced Revenue in 26 Nigerian States as Reform Windfall Flowed In, World Bank Finds

ABUJA – Twenty-six of 34 Nigerian states with available data increased spending faster than revenue between 2023 and 2025, according to the World Bank, as a windfall from currency and fuel subsidy reforms flowed through to subnational governments.

The findings

The World Bank’s October 2026 Nigeria Development Update, titled “Beyond the Federal Purse”, examined how states used the higher revenues that followed foreign exchange reform, the removal of the petrol subsidy and better tax administration, Nairametrics reported.

Six states grew revenue faster than spending: Akwa Ibom, Enugu, Kano, Katsina, Niger and Taraba. Ekiti and Ogun recorded broadly similar growth in both. The bank said the different responses did not follow a clear geographic or economic pattern.

Where the windfall came from

Gross federation revenues rose 69% in real terms between 2023 and 2025, and net distributable revenues rose 60%. States gained the most. Their share of distributable revenue increased about 129.5% in real terms, from N3.21 trillion to N7.37 trillion at 2019 prices, compared with 40.8% for the Federal Government and 100.7% for local governments.

The report linked the increase to higher statutory allocations, settlement of long-standing federal obligations to states, stronger VAT collections and dedicated intervention funds.

Where the money went

Aggregate state spending rose from about N3.4 trillion in 2021 to N9.6 trillion in 2025 in real terms. Transport expenditure climbed from about N100 billion to N2.5 trillion, or 26.5% of the total. Capital spending rose from 46% to 61% of state expenditure, and states also spent more on education, health, housing, agriculture and social protection.

Why it matters

The broader report found Nigeria’s economy grew 4.2% in the first half of 2026 and projected average growth of 4.4% through 2028, according to a World Bank press release. It urged states to improve spending efficiency, accountability and service delivery so that higher revenues translate into jobs and better living standards.

For investors, the shift towards capital spending points to a larger pipeline of state-level road, housing and energy projects. The risk is that spending commitments made during a revenue upswing become hard to unwind if oil prices, the naira or federal allocations weaken. Internally generated revenue remains concentrated: Lagos alone accounted for 34.4% of the N5.15 trillion collected by states and the FCT in 2025, Nairametrics reported earlier.

Sources

• Nairametrics: 26 Nigerian states increased spending faster than revenue over two years – World Bank
• World Bank: From higher revenues to better lives (press release)