26 states spent faster than revenue grew, World Bank finds

Twenty-six Nigerian states increased spending faster than revenue between 2023 and 2025, the World Bank said in its October 2026 Nigeria Development Update, titled Beyond the Federal Purse: How Higher Revenues Shaped State Priorities. Median expenditure growth across the 34 states with data was about 134% in real terms, against median revenue growth of 79%.

Spending outran revenue in 26 states

The report examined how state governments responded to higher public revenues after major economic reforms. Expenditure growth exceeded revenue growth in 26 of the 34 states with available data, although the gap varied widely. Abia, Kaduna, Benue and Gombe recorded particularly large differences between expenditure and revenue growth.

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 said the different spending responses did not follow a clear geographical or economic pattern, highlighting varying fiscal decisions by state governments.

“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.

Federation revenue rose sharply

The spending expansion came as revenues available to states rose sharply after foreign exchange market reforms, removal of the petrol subsidy and improvements in tax administration. Gross federation revenues increased by 69% in real terms between 2023 and 2025, while net distributable revenues rose by 60%.

States were the biggest beneficiaries. Their share of distributable federation revenues rose by about 129.5% in real terms, from N3.21 trillion in 2023 to N7.37 trillion in 2025, using 2019 constant prices. The Federal Government’s share rose by 40.8%, while the share allocated to local governments rose by 100.7%. The report attributed the stronger flows to higher statutory allocations, settlement of longstanding federal obligations to states, increased VAT collections and dedicated intervention funds, including infrastructure and security allocations.

Transport spending jumped

Aggregate state spending rose from about N3.4 trillion in 2021 to N9.6 trillion in 2025 in real terms, according to the report. A significant portion went into transport and other economic infrastructure. Transport expenditure increased from about N100 billion in 2021 to N2.5 trillion in 2025, accounting for 26.5% of total state expenditure.

States also increased spending on education, health, housing, agriculture and social protection, although economic infrastructure recorded the strongest relative shift in spending priorities.

Revenue growth remains uneven

State government revenues increased by 93% in real terms between 2023 and 2025, while expenditure rose by 92%, according to Nairametrics in October 2026. Capital spending increased as a share of total expenditure, from 46% to 61%.

In September 2026, Nairametrics reported that Nigeria’s 36 states and the Federal Capital Territory generated N5.15 trillion in internally generated revenue 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.

For Nigerian businesses, the key signal is that state spending is rising, especially on transport and economic infrastructure, even as revenue growth lags in most states. That can support construction and services demand, but it also puts pressure on states to keep spending backed by sustainable revenue and stronger fiscal management.