Get Guardian on Google• World Bank, others fault states’ failure to use revenue windfall judiciously
• Reveal FAAC transfers accounted for 73% of states’ revenues
Lagos State has emerged Nigeria’s most fiscally sustainable state, while Cross River ranked last among the 35 states assessed in BudgIT’s 2026 State of States report.
However, the World Bank, BudgIT Foundation and Ford Foundation faulted state governments over their failure to translate increased revenue allocations into improved welfare and better public services.
In the 11th edition of the BudgIT report, launched yesterday under the theme ‘From Allocation to Impact: Rethinking State Spending Priorities’, the civic tech non-profit said Enugu and Bayelsa ranked second and third, respectively, while Delta and Kebbi completed the top five.
The organisation said Plateau, Kogi, Osun, and Ogun ranked 34th, 33rd, 32nd and 31st, respectively, as Lagos scored 66.97 points, ahead of Enugu (65.45) and Bayelsa (64.3 points).
BudgIT said the assessment examined states’ ability to generate revenue, manage operating costs, invest in critical sectors, and control debt.
“The fiscal dividend of macroeconomic reform must be assessed by its developmental consequences, not merely by the nominal growth of government receipts,” the organisation said.
It pointed out that the assessment was based on four pillars: revenue performance (40 per cent); fiscal viability (30 per cent), debt sustainability (15 per cent), and spending on selected critical sectors (15 per cent).
The report said the selected sectors are agriculture, health, education, and water, sanitation, and hygiene (WASH).
BudgIT said Lagos retained the top position with internally generated revenue (IGR) of N1.71 trillion in 2025, up 35.67 per cent from N1.25 trillion in 2024.
The total revenue for the state increased by 19.26 per cent from N2.25 trillion in 2024 to N2.68 trillion in 2025, according to the non-profit.
Enugu’s second-place position reportedly followed a 125.91 per cent increase in IGR to N407.76 billion from N180.5 billion in 2024.
However, BudgIT said non-tax receipts accounted for 90.79 per cent of the absolute increase in the state’s IGR, raising questions about the sustainability of the revenue growth.
The report said Oyo and Gombe also recorded IGR growth of 112.79 per cent and 111.28 per cent, respectively.
Jigawa, Katsina, Borno, Bauchi and Ebonyi were among the leading states in the report’s assessment on spending on selected critical sectors.
WORLD Bank, BudgIT Foundation and Ford Foundation said the growing fiscal resources available to states, largely driven by increased Federation Account Allocation Committee (FAAC) disbursements, had not resulted in commensurate improvements in healthcare, education, social protection and other critical sectors.
Speaking yesterday at the Abuja launch of BudgIT’s 11th State of States Report, the World Bank’s Senior Country Economist, Ms Gloria Joseph-Raji, said state governments must strengthen public financial management and ensure that increased revenues translate into tangible development outcomes.
She disclosed that Federation Account transfers accounted for an average of 73 per cent of aggregate state revenues between 2021 and 2025, excluding Lagos, underscoring the heavy dependence of most states on federal allocations.
According to her, federal transfers accounted for more than 75 per cent of revenue in all but a handful of states in 2025, while internally generated revenue was sufficient to cover recurrent expenditure in only two states.
Joseph-Raji noted that recent fiscal and economic reforms, including the removal of petrol subsidy and foreign exchange unification, increased resources available to the three tiers of government, creating an opportunity for states to improve service delivery and accelerate human capital development.
She, however, cautioned that higher allocations alone would not guarantee better outcomes without credible budgets, effective cash management, stronger expenditure controls and improved public investment management.
The World Bank economist urged state governments to strengthen fiscal and debt-risk management, while directing more resources towards education, healthcare, social protection, sanitation and other services that directly affect citizens.
BudgIT Country Director, Mr Yahyala Kwaga, said the substantial increase in state revenues made it imperative for governors to demonstrate how public funds were improving the living conditions of their people.
He disclosed that the combined yearly revenue of the 35 states covered by the report increased from N4.99 trillion in 2022 to N15.53 trillion in 2025, with FAAC allocations rising from N3.43 trillion to N11.38 trillion within the period.
Kwaga said the figures represented a significant expansion in the fiscal capacity of state governments, but stressed that the central question was whether the additional resources were producing measurable improvements in citizens’ welfare.
BudgIT Senior Research and Policy Analyst, Ms Oludamilola Onemano, said the organisation was reviewing its State of States assessment framework to place greater emphasis on development outcomes and citizens’ experiences, rather than focusing solely on the fiscal health and revenue profiles of state governments.
Ford Foundation’s Programme Manager, Ms Joy Ehinor-Esezobor, also challenged governments and stakeholders to assess public revenue by its impact on the people rather than the volume of funds received.
She called on legislators, civil society organisations and the media to intensify scrutiny of public expenditure and verify whether budgetary allocations were reaching intended beneficiaries.
In her keynote, Dr Iboro Nelson of the Department of Economics, Amadeus University, Abia State, said the sharp rise in FAAC disbursements had not translated into corresponding improvements in the welfare of Nigerians.
