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The World Bank says 26 Nigerian states increased spending faster than revenue between 2023 and 2025, raising concerns about how sustainably state governments are managing their finances. Median state expenditure grew by 134% in real terms, compared with 79% revenue growth. Although higher federal allocations boosted state income, the figures highlight the need for better spending controls and stronger revenue generation.
The World Bank made the findings in its Nigeria Development Update, which examined state finances following the removal of the petrol subsidy, foreign exchange reforms and improvements in revenue collection.
The report found that Abia, Kaduna, Benue and Gombe recorded some of the widest gaps between spending and revenue growth. However, Akwa Ibom, Enugu, Kano, Katsina, Niger and Taraba recorded faster revenue growth than expenditure, while Ekiti and Ogun had more balanced growth.
Federal allocations contributed significantly to the increase in state revenue. Allocations to state governments rose by 129.5% in real terms, from ₦3.21 trillion in 2023 to ₦7.37 trillion in 2025, using 2019 constant prices. Higher statutory transfers, VAT receipts and intervention funds supported the increase.
States also directed more funding towards infrastructure, particularly transport. Transport expenditure rose from about ₦100 billion in 2021 to ₦2.5 trillion in 2025, accounting for 26.5% of total state expenditure. Capital spending also increased from 46% to 61% of total expenditure.
The central message from the World Bank is that increased government revenue has created more room for state spending, but rising expenditure must be matched by sustainable revenue growth. Otherwise, states could struggle to maintain public projects and meet future financial obligations.
Why it matters
State governments are responsible for delivering essential services and infrastructure, including roads, schools and healthcare. If spending continues to grow faster than revenue, states could face pressure to fund existing commitments, potentially affecting the quality and delivery of public services
What it means for your money
The way states manage their finances can affect residents through public infrastructure, healthcare, education and local economic activity. Better spending management could improve services and support businesses, while weak financial planning could lead to delayed projects, additional charges or reduced public services. Ultimately, the benefit of increased government revenue depends on how effectively it is spent.
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The key issue to watch is whether state governments can turn increased federal allocations into sustainable development while strengthening their internally generated revenue. Their ability to control recurrent spending, maintain infrastructure investment and improve budget management will determine whether the additional funds deliver lasting benefits.
The central challenge is ensuring that increased revenue translates into sustainable public spending. State governments will need to strengthen internally generated revenue, control expenditure and prioritise projects that deliver lasting economic and social benefits. Their ability to manage these resources will determine whether the recent increase in funding improves public services without creating long-term financial pressure.
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