By Frontline Reporters

At least 26 state governments were unable to generate enough Internally Generated Revenue (IGR) to meet their personnel costs in 2025, highlighting their continued dependence on allocations from the Federation Account despite a significant improvement in state finances.

An analysis of the 2026 BudgIT report, Nigeria’s Economic Reforms: What Has Changed Across Nigeria’s States? An Analysis of State Finances in the Post-Subsidy Years, showed that only eight of the 34 states covered generated IGR above their personnel expenditure during the year. The states were Lagos, Enugu, Ogun, Delta, Kaduna, Kwara, Abia and Anambra.

The remaining 26 states generated a combined IGR of about N1.16 trillion, but spent approximately N1.91 trillion on personnel, leaving a funding gap of roughly N747 billion between internally generated revenue and wage-related expenditure.

The figures were based on the states’ full-year budget implementation reports for 2022 and 2025. Akwa Ibom and Rivers were excluded from the analysis because of incomplete or unavailable data.

The data do not suggest that states are expected to finance salaries solely from IGR, as statutory allocations remain a legitimate source of government revenue. Rather, the figures expose the extent to which many states would struggle to meet even their personnel obligations without funds distributed through the Federation Account Allocation Committee (FAAC).

FAAC Dependence Deepens

The dependence has persisted despite a substantial rise in revenues available to states following the removal of the petrol subsidy, foreign exchange reforms and increased inflows into the Federation Account.

According to BudgIT, aggregate FAAC allocations to states rose from N3.43 trillion in 2022 to N11.38 trillion in 2025, representing a 232.06 per cent increase and a compound annual growth rate of 50.2 per cent.

IGR also recorded strong growth, rising from N1.57 trillion to N4.15 trillion during the same period. However, its 165.01 per cent growth and 38.38 per cent compound annual growth rate remained below the pace of expansion in FAAC receipts.

As a result, states became more dependent on federal transfers even as their internally generated revenues increased. FAAC accounted for 68.7 per cent of aggregate state revenue in 2022 but rose to 73.3 per cent in 2025, while IGR’s share declined from 31.4 per cent to 26.7 per cent.

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

The organisation stressed that stronger domestic revenue mobilisation would be crucial to improving the long-term fiscal sustainability of the states and reducing their dependence on federal transfers.

Yobe, Jigawa, Oyo Record Huge Gaps

A state-by-state assessment showed wide disparities between IGR and personnel expenditure.

Yobe generated just N15.42 billion in IGR in 2025 but spent N76.34 billion on personnel, leaving a shortfall of approximately N60.91 billion. Its personnel costs were therefore almost five times its internally generated revenue.

Taraba generated N17.89 billion against personnel expenditure of N55.60 billion, while Sokoto recorded IGR of N20.58 billion against personnel costs of N58.65 billion. Adamawa generated N24.14 billion internally compared with a personnel bill of N65.73 billion.

Jigawa’s personnel expenditure stood at N92.66 billion, compared with IGR of N35.27 billion, leaving a gap of N57.39 billion. Benue generated N29.38 billion but spent N73.94 billion on personnel.

Kogi recorded IGR of N36.50 billion against personnel expenditure of N89.20 billion, while Kebbi generated N18.41 billion, less than half of its N44.82 billion personnel costs.

Other states whose personnel expenditure 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 State recorded the largest shortfall, generating N102.52 billion in IGR against personnel expenditure of N170.04 billion, a gap of about N67.51 billion.

Yobe followed with a deficit of N60.91 billion, while Jigawa recorded N57.39 billion. Ondo’s personnel expenditure of N99.58 billion exceeded its N45.63 billion IGR by N53.94 billion. Kogi recorded a gap of N52.70 billion, while Bayelsa’s N52.15 billion IGR fell short of its N98.75 billion personnel bill by N46.60 billion.

Lagos, Enugu Lead Revenue Performers

Some states, however, demonstrated stronger capacity to finance their wage bills from internally generated revenue.

Edo came closest to balancing the two, generating N98.45 billion in IGR against personnel expenditure of N99.27 billion, a difference of less than N1 billion.

Gombe generated N36.36 billion against personnel costs of N53.95 billion, while Osun recorded N58.80 billion in IGR compared with N87.46 billion spent on personnel.

The number of states whose personnel expenditure exceeded their IGR also improved slightly from 2022. In that year, 28 of the 34 states had personnel expenditure above IGR. By 2025, four states — Abia, Delta, Enugu and Kwara — had moved into the category of states generating enough internally to cover their personnel costs.

However, Ebonyi and Jigawa moved in the opposite direction.

Lagos remained the dominant performer, generating a staggering N1.85 trillion in IGR in 2025, compared with N656.35 billion in 2022. Its IGR alone accounted for about 44 per cent of the combined N4.15 trillion generated by the 34 states covered by the report.

Lagos spent N333.67 billion on personnel, meaning its IGR was more than five times its wage bill.

Enugu generated N406.77 billion against personnel expenditure of N56.40 billion, while Ogun recorded N237.65 billion in IGR against N151.27 billion in personnel costs. Delta generated N206.44 billion, compared with personnel expenditure of N197.81 billion.

Other states whose IGR exceeded personnel costs were Kaduna, with N86.72 billion in IGR against N77.63 billion in personnel expenditure; Kwara, N85.21 billion against N65.22 billion; Abia, N66.86 billion against N62.26 billion; and Anambra, N54.24 billion against N39.95 billion.

Lagos Skews National Picture

Lagos’ overwhelming contribution also means the aggregate IGR figures present a stronger picture of state finances than the reality in most states.

Excluding Lagos, the remaining 33 states generated about N2.30 trillion in IGR in 2025, while their combined personnel expenditure stood at roughly N2.56 trillion. This means personnel costs exceeded internally generated revenue by about N254 billion.

Enugu also recorded an extraordinary increase in IGR, rising from N25.12 billion in 2022 to N406.77 billion in 2025 — an increase of N381.66 billion and a compound annual growth rate of 153.01 per cent, the highest among the states.

BudgIT, however, raised questions about the nature of the increase, noting that a large portion was attributed to proceeds collected by the Enugu State Housing Development Corporation following the state government’s intervention in the landed property market.

The organisation cautioned that such receipts could be cyclical and therefore may not represent a sustainable source of recurring revenue.

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

Not all states experienced growth. Three states — Jigawa, Sokoto and Ebonyi — recorded lower IGR in 2025 than in 2022.

Jigawa recorded the sharpest decline, with IGR falling from N59.40 billion to N35.27 billion. Sokoto’s revenue dropped from N23.60 billion to N20.58 billion, while Ebonyi’s declined marginally from N23.89 billion to N23.25 billion.

Jigawa’s position was particularly striking because its personnel expenditure increased substantially, from N52.37 billion in 2022 to N92.66 billion in 2025, even as its IGR fell, deepening the state’s dependence on other sources of revenue.

Oyedele, Economists Seek Fiscal Reforms

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 shield Nigeria from economic shocks.

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

He urged stakeholders to critically examine Nigeria’s current revenue allocation and derivation principles, while advocating greater fiscal responsibility, accountability and cooperation among the three tiers of government.

The minister also challenged state governments to strengthen their IGR, attract investments and create jobs rather than depend excessively on federal allocations.

Imo State Governor, Hope Uzodimma, represented by his deputy, Chinyere Ekomaru, said states must be empowered to generate more revenue and deploy available resources efficiently, stressing that continued reliance on oil revenue was no longer sustainable.

Similarly, economist and former Vice-Chancellor of the University of Uyo, Prof. Akpan Ekpo, urged states to explore new ways of increasing their internally generated revenue by improving service delivery and creating an environment capable of attracting investment.

Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, also warned that many states were not fiscally sustainable and could face serious financial pressures without increased investment.

Yusuf called on state governments to attract more private-sector investment and reduce their dependence on FAAC. He also criticised the size of the public workforce in many states, arguing that bloated bureaucracies and excessive political appointments were putting additional pressure on state finances.

According to him, many states need to rationalise their workforce and reduce unnecessary appointments to free resources for productive sectors and development.

The latest BudgIT figures therefore present a mixed picture: while state revenues have grown considerably since 2022, the faster rise in federal transfers compared with IGR shows that many states remain structurally dependent on FAAC, raising fresh questions about fiscal sustainability, revenue mobilisation and the future of Nigeria’s federal system.

ADVERTISEMENTS