The 36 states of the federation and the Federal Capital Territory (FCT) generated a combined N5.15 trillion in Internally Generated Revenue (IGR) in 2025, representing a 40.93 per cent increase over the N3.65 trillion recorded in 2024.

The latest revenue figures released by the National Bureau of Statistics (NBS), however, reveal a sharp concentration of internally generated income in a handful of states, with Lagos alone accounting for N1.77 trillion, or more than one-third of the combined revenue generated by the 36 states and the FCT.

Rivers followed with N428.42 billion, while Enugu ranked third with N406.77 billion, underscoring the wide disparity in the revenue-generating capacity of Nigeria’s sub-national governments.

At the other end of the spectrum, Yobe, Ebonyi and Sokoto recorded the lowest IGR during the period, generating N16.01 billion, N17.18 billion and N20.48 billion, respectively.

The figures highlight the continuing differences in the fiscal capacity of states and the extent to which many sub-national governments remain dependent on federally distributed revenues to finance their budgets.

According to the report, tax revenue remained the dominant source of IGR, accounting for 73.64 per cent of total internally generated revenue nationwide.

Personal income tax through Pay-As-You-Earn (PAYE) was by far the largest tax revenue source, generating N2.64 trillion, representing 69.51 per cent of total tax revenue collected by the states and the FCT during the year.

Capital gains tax, by contrast, was the least significant tax component, contributing only N12.40 billion.

The revenue structure covers two broad categories: tax revenue and revenue generated by Ministries, Departments and Agencies (MDAs), alongside other sources including local government revenue.

The sharp year-on-year increase in IGR marks a significant expansion in the internally generated revenue base of the states. But the concentration of collections in a few economically stronger jurisdictions raises questions about the fiscal sustainability of states with weaker productive and taxable economic bases.

Lagos’ N1.77 trillion revenue was more than four times the amount generated by Rivers and over 100 times the revenue recorded by Yobe.

The figures also point to the importance of employment, formal economic activity and the size of the taxable population in determining states’ capacity to raise revenue internally, particularly as PAYE remains the dominant component of tax collections.

For many states, therefore, the challenge extends beyond improving tax administration to expanding the underlying economic activities capable of generating sustainable taxable income.

The 2025 performance suggests that while states collectively improved their revenue mobilisation, the gains remain unevenly distributed, with a small number of states accounting for a disproportionately large share of the total.

This disparity could have significant implications for the ability of state governments to fund infrastructure, social services and other development programmes from internally generated resources rather than relying heavily on Federation Account allocations.