This was revealed by the World Bank in its October 2026 Nigeria Development Update, Beyond the Federal Purse: How Higher Revenues Informed State Priorities, an analysis of how state governments reacted to the increase in public revenues as a result of major economic reforms.
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The analysis revealed that the median real expenditure growth rate in the assessed states is approximately 134% from 2023 to 2025 while the median real revenue growth is 79%.
Abia, Kaduna, Benue, and Gombe are some of the states that recorded some of the widest differences between the growth of their expenditure and revenue. “Expenditure growth in real terms exceeded revenue growth in 26 of the 34 states between 2023 and 2025,” the World Bank stated. Abia, Kaduna, Benue, and Gombe are some of the states that recorded wide differences between their growth of expenditure and revenues.
However, six states had higher growth in revenues than expenditure while two states had similar levels of growth in both revenues and expenditures. “Six states (Akwa Ibom, Enugu, Kano, Katsina, Niger and Taraba) had higher revenue growth than expenditure while Ekiti and Ogun states have similar growth rates in their revenue and expenditure,” the World Bank stated.
The World Bank pointed out that the response to spending by the various states was not driven by geographical or economic factors since there were different fiscal responses adopted by the states.
States benefit from increased federal allocation
It is important to note that this expansion in spending was achieved when the revenue available to the states experienced a significant increase due to the reforms in the foreign exchange market, abolition of petrol subsidy and improved tax administration.
According to the World Bank, gross federation revenues increased by 69% in real terms from 2023 to 2025, while net distributable revenues increased by 60%.
It is worth noting that most of the benefits accrued to states in the form of increased revenues. “State share of distributable federation revenues increased by approximately 129.5% in real terms, rising from N3.21 trillion in 2023 to N7.37 trillion in 2025 using 2019 constant prices,” the World Bank stated.
On the other hand, the Federal Government’s share of distributable federation revenues increased by 40.8% while that of local governments increased by 100.7%.
The World Bank stated that the growth in the flow of revenues could be attributed to higher statutory allocations, resolution of outstanding federal obligations to states, increased VAT collection and intervention funds such as infrastructure and security.
Increased revenues drive increased state spending
With increased revenue, there was an increase in state spending.
Spending by the states increased from approximately N3.4 trillion in 2021 to N9.6 trillion in 2025 in real terms, according to the report.
A good chunk of the increase was allocated to transport and other economic infrastructures.
“The states increased their budget allocation for transport from approximately N100 billion in 2021 to N2.5 trillion in 2025. Transport allocation constitutes 26.5 percent of total state expenditure,” the World Bank stated.
There was also increased spending on education, health, housing, agriculture and social protection while economic infrastructure had the highest share of the increase in spending priority.
Increased state revenues amid varied fiscal capacity
The spending trend revealed by the World Bank comes at a time when Nigerian states are enjoying an increase in revenue despite the fact that their ability to generate revenues locally is varied.
According to Nairametrics reported in October 2026 that state government revenues increased by 93% in real terms from 2023 to 2025 while expenditures increased by 92%. Also, the World Bank found that capital spending as a share of total expenditures increased from 46% to 61%.
Previously, in September 2026, Nairametrics reported that the 36 states and the Federal Capital Territory of Nigeria generated N5.15 trillion in internally generated revenue (IGR) in 2025, an increase of 40.93% from N3.65 trillion in 2024. Three states-Lagos, Rivers, and Enugu-produced N2.60 trillion, representing 49% of the total. Lagos alone produced 34.4% of the total.
