Higher revenues fail to improve living conditions in states, BudgIT warns

Despite increased revenues and higher capital spending by state governments, Nigerians are yet to see corresponding improvements in public services and living conditions, the 2026 State of States Report by BudgIT has revealed.

The report, which assessed the 2025 fiscal performance of 35 states, found that rising government revenues were not necessarily translating into better healthcare, education, agriculture, water supply and other essential services, amid growing operating costs and weaknesses in budget implementation.

It warned that the fiscal gains arising from the removal of petrol subsidy and exchange rate reforms risk becoming an expansion of government spending without corresponding improvements in citizens’ welfare.

According to the report, federal allocations to the 35 states assessed increased from about N5.4 trillion in 2023 to N11.38 trillion in 2024, significantly expanding the resources available to subnational governments.

However, the increased inflows have not automatically strengthened states’ capacity to deliver public services, with BudgIT arguing that fiscal performance should be measured by how effectively governments convert available resources into tangible development outcomes.

The report also highlighted the continued dependence of several states on federal allocations, despite improvements in internally generated revenue (IGR).

While Lagos generated N1.71 trillion in IGR in 2025, accounting for 67.72 per cent of its recurrent revenue, federal allocations accounted for 79.28 per cent of Kano’s recurrent revenue, 82.90 per cent of Abia’s and 86.47 per cent of Anambra’s total revenue.

Enugu recorded a 125.91 per cent increase in IGR to N407.76 billion. However, non-tax receipts accounted for 90.79 per cent of the increase, raising questions about the sustainability of its revenue growth.

BudgIT cautioned that increases driven largely by fees, charges and other non-tax receipts may not represent a lasting expansion of states’ taxable economic bases.

The organisation also identified rising government operating expenses as a threat to the resources available for development projects.

In Abia, operating expenses nearly doubled from N64.19 billion in 2024 to N126.68 billion in 2025, driven partly by a 197.07 per cent increase in overhead costs to N70.87 billion. Consequently, the state’s IGR covered only 53.56 per cent of its operating expenses, down from 64.28 per cent in the previous year.

Similarly, Oyo’s operating expenses rose by 88.85 per cent to N372.68 billion, while Lagos recorded N1.29 trillion in operating expenses, representing a 23.89 per cent increase.

Although capital expenditure increased in several states, the report questioned whether the spending reflected citizens’ most pressing needs.

In Abia, actual construction spending reached N150.54 billion, exceeding the combined N96.29 billion spent on health, education, agriculture and water supply. The state also spent only N26.03 billion of its revised N74.11 billion health allocation and N1.95 billion of N18.84 billion allocated to agriculture.

BudgIT said higher capital spending alone was insufficient to establish development gains without evidence of completed projects and improved access to essential services.

On fiscal performance, Lagos ranked first with an index score of 66.97, to followed by Enugu with 65.45 and Bayelsa with 64.30. Delta and Kebbi completed the top five. Cross River ranked last with 22.12, while Plateau and Kogi occupied the 34th and 33rd positions respectively.

The report also raised concerns about debt sustainability, noting that liabilities such as unpaid contractors’ bills, pensions and gratuities could place additional pressure on future government revenues.

It recommended stronger revenue administration, prudent debt management, credible budgets and improved monitoring of public expenditure to ensure that increased government revenues translate into better living conditions.

Rivers State was excluded from the assessment because it did not produce audited financial statements or budget implementation reports for 2025.