The World Bank has criticized the spending priorities of Nigerian state governments, warning that increased revenues following recent economic reforms have not translated into proportionate investments in education, healthcare, and social protection.
The global lender observed that although states had increased spending on essential public services, investments in transport infrastructure had grown considerably faster, even in states with poor human development indicators.
A senior economist at the World Bank Nigeria Office, Gloria Joseph-Raji, raised the concerns on Tuesday in Abuja during the launch of BudgIT’s 2026 State of States Report, themed ‘From Allocation to Impact: Rethinking State Spending Priorities.’
She said, “Spending on education, health, and social protection has also risen substantially, but it has not kept pace with the rapid growth in transport infrastructure spending, even in states with weaker human capital outcomes.”
Joseph-Raji explained that the bank’s October Nigeria Development Update, which examined budget implementation reports from all 36 states, found that governments had expanded transport infrastructure and reduced their debt burdens, particularly domestic debt, following increased fiscal allocations.
She attributed the revenue growth to petrol subsidy removal, exchange rate unification and improvements in tax administration since 2023, alongside federal intervention funds and the settlement of longstanding obligations to states.
According to her, the additional resources have enabled states to meet salary obligations and created opportunities for improved public service delivery.
However, she warned that excessive dependence on Federation Account allocations continued to expose state finances to fluctuations in federally shared revenue.
“In 2025, federation transfers accounted for more than three-quarters of revenue in all but a handful of states,” she said.
She disclosed that federation transfers accounted for 73 per cent of aggregate state revenues between 2021 and 2025, excluding Lagos, while internally generated revenue was sufficient to cover recurrent expenditure in only two states.
Joseph-Raji noted that states received 26.72 per cent of net Federation Account revenues and now received 55 per cent of Value Added Tax revenue under the revised sharing formula.
Meanwhile, BudgIT’s Country Director, Vahyala Kwaga, disclosed that aggregate revenue across the 34 states covered in its comparative analysis rose from N4.99tn in 2022 to N15.53tn in 2025, representing an increase of N10.54tn.
He said FAAC allocations increased by more than 232 per cent, from N3.43tn to N11.38tn during the period.
Despite the revenue growth, Kwaga disclosed that the states had spent only N8.60tn, representing 24.4 per cent of their combined N35.22tn approved budgets, by June 2026.
“We must also examine how effectively they deploy the resources available to them, what they prioritise and whether their spending is delivering the outcomes that citizens need,” he said.
He explained that BudgIT had revised its assessment methodology to place greater emphasis on spending in education, healthcare, agriculture, water and sanitation, alongside revenue performance and debt sustainability.
Presenting the report, BudgIT’s Head of Research and Policy Advisory, Adejoke Akinbode, disclosed that total debt across the 35 states assessed increased by 10.41 per cent, from N10.57tn in 2024 to N11.67tn in 2025.
She identified Lagos as the most indebted state, with N2.9tn, while Osun spent N100.17bn servicing debt, equivalent to 28.6 per cent of its revenue.
Akinbode said Lagos ranked first in overall fiscal sustainability, followed by Enugu, Bayelsa, Delta and Kebbi, while Cross River ranked last. Rivers was excluded because of inadequate fiscal data.
She urged states to reduce administrative costs, strengthen revenue collection and link borrowing to productive investments.
In her keynote address, an economist and lecturer at Amadeus University, Abia State, Dr Iboro Nelson, argued that rising government revenues had failed to compensate households for the economic hardship associated with recent reforms.
