A World Bank assessment of Nigeria's subnational finances has found that 26 states raised spending more quickly than they grew revenues between 2023 and 2025, reinforcing concerns about the sustainability of public expenditure at the state level.
The findings are contained in the October 2026 Nigeria Development Update, titled 'Beyond the Federal Purse: How Higher Revenues Shaped State Priorities', which reviewed how state governments responded to the sharp rise in available resources after major economic reforms.
Across the states examined, median expenditure growth reached about 134% in real terms between 2023 and 2025, while median revenue growth stood at 79%. The World Bank said expenditure growth outpaced revenue growth in 26 of the 34 states with available data, although the size of the gap varied widely.
Abia, Kaduna, Benue and Gombe posted the largest differences between expenditure and revenue growth. In contrast, Akwa Ibom, Enugu, Kano, Katsina, Niger and Taraba recorded stronger revenue growth than expenditure growth, while Ekiti and Ogun showed broadly similar growth rates on both sides. The World Bank noted that the spending responses followed no clear geographical or economic pattern, reflecting distinct fiscal choices by individual state governments.
The expansion coincided with a marked increase in resources flowing to states after foreign exchange market reforms, the removal of the petrol subsidy and improvements in tax administration. Gross federation revenues grew 69% in real terms between 2023 and 2025, while net distributable revenues rose 60%. States were the biggest beneficiaries: their share of distributable federation revenue climbed about 129.5% in real terms, from N3.21 trillion in 2023 to N7.37 trillion in 2025 at 2019 constant prices. The Federal Government's share rose 40.8%, and local governments' share grew 100.7%. Higher statutory allocations, the settlement of longstanding federal obligations to states, increased VAT collections and dedicated intervention funds for infrastructure and security all contributed.
Aggregate state spending rose from roughly N3.4 trillion in 2021 to N9.6 trillion in 2025 in real terms. Transport expenditure jumped from about N100 billion in 2021 to N2.5 trillion in 2025, representing 26.5% of total state spending. States also increased outlays on education, health, housing, agriculture and social protection, though economic infrastructure recorded the strongest relative shift in priorities.
