Twenty-six Nigerian states were unable to generate enough Internally Generated Revenue to cover their personnel expenditure in 2025, highlighting the continued dependence of many subnational governments on allocations from the Federation Account despite a substantial increase in state revenues.
An analysis based on a new BudgIT report showed that only eight of the 34 states for which complete data were available generated more IGR than they spent on personnel during the year. The eight states were Lagos, Enugu, Ogun, Delta, Kaduna, Kwara, Abia and Anambra. Akwa Ibom and Rivers were excluded from the comparison because complete or usable data were unavailable.
Across the remaining 26 states, internally generated revenue stood at about N1.16 trillion, while personnel expenditure reached approximately N1.91 trillion. That left a combined gap of roughly N747 billion between what the states generated internally and what they spent on personnel.
The figures do not mean that state governments are expected to finance salaries entirely from IGR. Statutory allocations from the Federation Account are a legitimate source of state revenue. Rather, the comparison exposes the degree to which many states would struggle to meet even their personnel obligations without transfers from the federal revenue-sharing system.
The finding is particularly significant because the revenue available to states has risen sharply in recent years. Aggregate allocations from the Federation Account to states increased from N3.43 trillion in 2022 to N11.38 trillion in 2025, representing a 232.06 per cent increase. Over the same period, states' IGR rose from N1.57 trillion to N4.15 trillion, an increase of 165.01 per cent.
The difference in the pace of growth has actually increased the relative importance of federal transfers. FAAC accounted for 68.7 per cent of the aggregate revenue of the states covered by the analysis in 2022, but that share increased to 73.3 per cent in 2025. The contribution of IGR, meanwhile, fell from 31.4 per cent to 26.7 per cent.
In other words, states are collecting considerably more revenue internally than they did three years earlier, but federal transfers have grown even faster. The result is that improved state revenues have not translated into greater fiscal independence across much of the country.
The disparities between states are substantial. Yobe recorded one of the largest mismatches, generating only N15.42 billion in IGR against personnel expenditure of N76.34 billion. Its personnel bill was therefore almost five times the revenue it generated internally, leaving a gap of about N60.91 billion.
Taraba generated N17.89 billion while spending N55.60 billion on personnel. Sokoto generated N20.58 billion compared with personnel costs of N58.65 billion, while Adamawa recorded N24.14 billion in IGR against N65.73 billion in personnel expenditure. Jigawa spent N92.66 billion on personnel after generating N35.27 billion internally, while Benue recorded N29.38 billion in IGR against personnel expenditure of N73.94 billion.
Oyo recorded the largest absolute gap among the 26 states. Its IGR stood at N102.52 billion, compared with personnel expenditure of N170.04 billion, leaving a difference of approximately N67.51 billion. Yobe followed with a N60.91 billion gap, while Jigawa recorded a shortfall of N57.39 billion.
Ondo generated N45.63 billion but spent N99.58 billion on personnel, producing a gap of N53.94 billion. Kogi recorded N36.50 billion in IGR against N89.20 billion in personnel expenditure, while Bayelsa generated N52.15 billion compared with personnel costs of N98.75 billion.
At the other end of the scale, some states came much closer to covering their wage obligations through internally generated revenue. Edo generated N98.45 billion and spent N99.27 billion on personnel, leaving a gap of less than N1 billion. Gombe recorded N36.36 billion in IGR against N53.95 billion in personnel expenditure, while Osun generated N58.80 billion compared with N87.46 billion in personnel costs.
The comparison also shows that the situation has improved modestly since 2022. At that time, 28 of the 34 states covered by the analysis had personnel expenditure higher than their IGR. By 2025, that number had fallen to 26.
Abia, Delta, Enugu and Kwara moved from having personnel costs above IGR in 2022 to generating enough internally to cover those costs in 2025. However, Ebonyi and Jigawa moved in the opposite direction, showing that progress in state revenue performance has not been uniform.
Lagos remains a major outlier in the figures. The state generated N1.85 trillion in IGR in 2025, up from N656.35 billion in 2022. Its internally generated revenue alone accounted for about 44 per cent of the 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 personnel expenditure. Enugu also recorded an unusually strong performance, generating N406.77 billion against personnel expenditure of N56.40 billion. Ogun generated N237.65 billion compared with N151.27 billion in personnel costs, while Delta recorded N206.44 billion in IGR against N197.81 billion in personnel expenditure.
The dominance of Lagos also illustrates why aggregate state revenue figures can conceal the financial reality facing many individual states. Excluding Lagos, the other 33 states generated about N2.30 trillion in IGR in 2025 while spending roughly N2.56 trillion on personnel. Their combined personnel expenditure therefore exceeded their IGR by approximately N254 billion.
Enugu's figures also require some caution. Its IGR jumped from N25.12 billion in 2022 to N406.77 billion in 2025, an increase of more than N381 billion. BudgIT attributed much of the increase to proceeds collected by the Enugu State Housing Development Corporation from government intervention in the landed-property market and raised questions about the classification and potentially cyclical nature of those receipts.
Not all states recorded growth in internally generated revenue. Jigawa's IGR declined from N59.40 billion in 2022 to N35.27 billion in 2025, while its personnel expenditure rose from N52.37 billion to N92.66 billion. Sokoto's IGR also fell, from N23.60 billion to N20.58 billion, while Ebonyi's declined marginally from N23.89 billion to N23.25 billion.
The wider picture is consistent with concerns raised in previous fiscal assessments that many Nigerian states remain heavily dependent on federally distributed resources. World Bank analysis has similarly found large differences in states' reliance on FAAC, with some obtaining the overwhelming majority of their revenue from federal transfers while Lagos and a smaller group have developed stronger internally generated revenue bases.
That dependence creates a vulnerability for states because FAAC distributions are closely connected to revenues available to the federation, including oil-related income and other federally collected revenues. A state whose spending commitments are heavily dependent on transfers has less control over the revenue available to meet its obligations when national revenues weaken.
The issue has consequently become part of the wider debate over fiscal federalism and the ability of states to finance development from sustainable sources. Finance Minister and Coordinating Minister of the Economy Taiwo Oyedele recently called for stronger fiscal responsibility, improved revenue generation and greater economic diversification by states, arguing that governments should work toward attracting investment and creating jobs rather than relying excessively on federal allocations.
Economists have similarly argued that states need to broaden their revenue bases while improving the quality of public services that encourage economic activity. Reducing unnecessary administrative costs and reviewing the size of state bureaucracies have also been proposed as ways of easing pressure on limited resources.
The latest figures therefore present a mixed picture. State finances have improved substantially since 2022, with both FAAC allocations and IGR increasing significantly, and several states have made clear progress in strengthening their internally generated revenue. Yet the fact that 26 of the 34 states with available data still could not cover personnel expenditure from IGR shows that greater revenue collection has not yet translated into broad-based fiscal independence.
For many state governments, the central challenge is now moving beyond the ability to pay salaries with the help of federal transfers toward building revenue systems capable of supporting infrastructure, healthcare, education and other public services without excessive dependence on allocations from Abuja. The figures suggest that, despite the revenue gains of recent years, that transition remains unfinished.
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