26 Nigerian states increased spending faster than revenue over two years – World Bank

Twenty-six Nigerian states increased expenditure faster than their revenues between 2023 and 2025, highlighting the importance of ensuring that higher spending is supported by sustainable revenue growth and stronger fiscal management.

The World Bank disclosed this in its October 2026 Nigeria Development Update, titled Beyond the Federal Purse: How Higher Revenues Shaped State Priorities, which examined how state governments responded to the increase in public revenues following major economic reforms.

The report found that median expenditure growth across the states assessed was approximately 134% in real terms between 2023 and 2025, compared with median revenue growth of 79%.

Abia, Kaduna, Benue record widest spending-revenue gaps

According to the World Bank, expenditure growth exceeded revenue growth in 26 of the 34 states with available data, although the extent of the gap varied considerably.

• “The spending response to higher revenues varied considerably across states. Between 2023 and 2025, expenditure growth in real terms exceeded revenue growth in 26 of the 34 states with available data,” the World Bank stated.

Abia, Kaduna, Benue and Gombe recorded particularly large differences between the growth in their expenditure and revenues.

However, six states recorded stronger revenue growth than expenditure growth. They were Akwa Ibom, Enugu, Kano, Katsina, Niger and Taraba.

Ekiti and Ogun recorded broadly similar growth rates in both revenue and expenditure.

The World Bank noted that the different spending responses did not follow a clear geographical or economic pattern, highlighting the varying fiscal decisions made by state governments during the period.

States benefited from higher federal allocations

The spending expansion came amid a significant increase in revenues available to state governments following foreign exchange market reforms, the removal of the petrol subsidy and improvements in tax administration.

The World Bank reported that gross federation revenues increased by 69% in real terms between 2023 and 2025, while net distributable revenues rose by 60%.

State governments were the biggest beneficiaries of the increase in federation revenue flows. Their share of distributable federation revenues rose by approximately 129.5% in real terms, from N3.21 trillion in 2023 to N7.37 trillion in 2025, using 2019 constant prices.

This compared with a 40.8% increase in the Federal Government’s share and a 100.7% increase in the share allocated to local governments.

The report attributed the stronger revenue flows to higher statutory allocations, the settlement of longstanding federal obligations to states, increased VAT collections and dedicated intervention funds, including infrastructure and security allocations.

Higher revenues drive expansion in state spending

The increase in available resources also translated into a substantial expansion in state expenditure.

Aggregate state spending rose from approximately N3.4 trillion in 2021 to N9.6 trillion in 2025 in real terms, according to the report.

A significant portion of the increase went into transport and other economic infrastructure-related spending.

Transport expenditure, in particular, increased from about N100 billion in 2021 to N2.5 trillion in 2025, accounting for 26.5% of total state expenditure.

The World Bank also observed that states increased spending on education, health, housing, agriculture and social protection, although economic infrastructure recorded the strongest relative shift in spending priorities

Rising state revenues and uneven fiscal capacity

The spending pattern identified by the World Bank comes amid a significant increase in revenue available to Nigerian states, although their capacity to generate funds internally remains uneven.

Nairametrics reported in October 2026 that state government revenues increased by 93% in real terms between 2023 and 2025, while expenditure rose by 92%. The World Bank report also found that capital spending increased as a share of total expenditure, from 46% to 61%.

Earlier, in September 2026, Nairametrics reported that Nigeria’s 36 states and the Federal Capital Territory generated N5.15 trillion in internally generated revenue (IGR) in 2025, up 40.93% from N3.65 trillion in 2024. Lagos, Rivers and Enugu were the three largest contributors, generating a combined N2.60 trillion, with Lagos alone accounting for 34.4% of the total.