Internally generated revenue across most of northern Nigeria is now being overwhelmed by wage bills, leaving only Kaduna and Kwara in a relatively sustainable position, according to the report.
The finding underscores a long-standing fiscal weakness in the region. Internally generated revenue, or IGR, comprises the receipts state governments collect outside monthly federal allocations, including pay-as-you-earn tax, direct assessment, road taxes, levies, fees, and returns on investments. When recurrent personnel costs grow faster than these collections, the share of revenue available for infrastructure, social services, and debt servicing shrinks.
Northern states generally report lower IGR than their southern counterparts, a gap driven by a narrower formal tax base, weaker commercial activity, and limited private-sector employment. Rising wage obligations, including adjustments flowing from minimum wage reviews and consequential salary increases, have widened that gap and placed additional strain on state budgets.
For most states in the region, the result is a heavier dependence on federal transfers and borrowing to meet basic obligations. That dependence limits the capacity of state governments to fund capital projects from their own resources and can complicate fiscal planning when allocations fluctuate.
Kaduna and Kwara stand out as exceptions. Their relative resilience reflects stronger internal revenue performance relative to wage costs, which has allowed both states to retain more fiscal headroom than their peers. The contrast highlights the importance of effective revenue administration and cost management in determining which sub-national governments can withstand recurrent expenditure pressure.
The implications extend beyond state budgets. Where wage bills absorb a large share of IGR, less funding is available for economic infrastructure and services that support business activity and future revenue growth. For investors and taxpayers, the disparity between Kaduna and Kwara and the rest of the northern states offers a useful signal of fiscal capacity and administrative efficiency across the region.
