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Most Nigerian states still depended mainly on federation transfers in 2025, with those transfers making up more than three-quarters of revenue in all but a handful of states, according to the World Bank. The warning came as the Bank said state revenues had risen substantially since 2023, but spending on transport infrastructure was growing faster than spending on education, health and social protection.
The World Bank says higher revenues flowing to Nigerian states since 2023 have not automatically translated into stronger spending on people-focused services.
Speaking at the launch of BudgIT’s State of States Report, World Bank representative Gloria Joseph-Raji said spending by states on transport infrastructure had grown faster than spending on education, health and social protection.
She also said federation transfers remained the dominant revenue source for most states. In 2025, those transfers accounted for more than three-quarters of revenue in all but a handful of states.
According to the World Bank, state revenues increased substantially after exchange-rate unification, the removal of petrol subsidy and improvements in tax administration. The Bank’s October 2026 Nigeria Development Update is titled, “Beyond the Federal Purse: How Higher Revenues Shaped State Priorities.”
The World Bank said Part 2 of that report examines how states can turn increased public resources into better development outcomes through more effective and accountable public spending.
The comments point to a central issue in subnational public finance: states may be collecting or receiving more money, but the pattern of spending matters just as much as the size of the revenue increase. The Bank’s message was that rising inflows should be matched by stronger investment in human capital, not only physical infrastructure.
Why it matters
For households, schools, hospitals and vulnerable groups, the balance between roads and human-capital spending affects daily life. Better transport links can support economic activity, but underinvestment in education, healthcare and social protection can weaken long-term development and limit the benefits of higher public revenue.
The World Bank’s position also matters because many states remain heavily reliant on federation transfers rather than internally generated revenue. That dependence can leave state finances exposed to changes in national revenue conditions and raise questions about how effectively larger allocations are being used.
What it means for your money
This is not a direct market or personal-finance story, and there is no immediate money action for individuals. However, state spending choices can affect the quality of public services residents receive, especially in education, healthcare and social support.
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Attention will now turn to how states respond to the World Bank’s findings in their budgeting and spending decisions. The October 2026 Nigeria Development Update provides the broader framework for tracking whether higher revenues are being matched by more effective and accountable spending.
It will also be worth watching whether states reduce their reliance on federation transfers over time or continue to depend on them as their main revenue source.
The World Bank’s message is that state revenues have risen, but most states still rely mainly on federation transfers and are increasing transport-infrastructure spending faster than education, health and social protection. The key issue now is whether bigger revenues will produce better outcomes for residents.
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