At least 26 state governments could not generate enough internal revenue to cover their personnel costs in 2025, as they continue to depend on allocations from the Federation Account despite a significant improvement in their finances.
According to an analysis by The PUNCH, ABNTV reports that only eight of the 34 states covered by a new BudgIT report generated Internally Generated Revenue higher than their personnel expenditure during the year. The eight states were Lagos, Enugu, Ogun, Delta, Kaduna, Kwara, Abia, and Anambra.
The remaining 26 states generated about N1.16tn internally but spent approximately N1.91tn on personnel, leaving a gap of about N747bn between their combined IGR and wage-related expenditure.
The findings are contained in BudgIT’s 2026 report titled ‘Nigeria’s Economic Reforms: What Has Changed Across Nigeria’s States? An Analysis of State Finances in the Post-Subsidy Years’.
The report analysed actual figures contained in states’ full-year budget implementation reports for 2022 and 2025. Akwa Ibom and Rivers were excluded because of incomplete or unavailable data.
The figures do not imply that states are expected to finance salaries exclusively from IGR because statutory allocations are a legitimate source of government revenue. They, however, show the extent to which many states would struggle to meet even their personnel obligations without revenue distributed by the Federation Account Allocation Committee.
This dependence has persisted despite the sharp rise in revenues available to states following the removal of petrol subsidy, foreign exchange reforms, and higher revenues accruing to the Federation Account.
According to BudgIT, aggregate FAAC allocations increased from N3.43tn in 2022 to N11.38tn in 2025, representing a 232.06 per cent increase and a compound annual growth rate of 50.2 per cent.
IGR also increased substantially, rising from N1.57tn to N4.15tn over the same period, but its 165.01 per cent growth and 38.38 per cent CAGR lagged the expansion in FAAC receipts.
Consequently, states became more dependent on federal transfers despite generating more revenue internally. FAAC accounted for 68.7 per cent of aggregate state revenue in 2022 but increased to 73.3 per cent in 2025. Conversely, IGR’s share fell from 31.4 per cent to 26.7 per cent.
BudgIT said this showed that “despite improvements in domestic revenue mobilisation, many states remained heavily reliant on transfers from the Federation Account.”
It stressed that improving domestic revenue mobilisation would be critical to strengthening states’ long-term fiscal sustainability and reducing their dependence on federal transfers.
The report said, “Although statutory allocations accounted for a larger share of the overall increase in revenues, strengthening domestic revenue mobilisation remains essential for improving long-term fiscal sustainability and reducing dependence on federal transfers.”
A state-by-state comparison by The PUNCH showed wide disparities between personnel expenditure and internally generated revenue. Yobe generated only N15.42bn internally in 2025 but spent N76.34bn on personnel. Its personnel bill was therefore almost five times its IGR, leaving a shortfall of about N60.91bn.
Taraba generated N17.89bn against personnel expenditure of N55.60bn, meaning its personnel costs were more than three times its IGR. Sokoto recorded IGR of N20.58bn but personnel expenditure of N58.65bn, while Adamawa generated N24.14bn internally against a N65.73bn personnel bill.
Jigawa’s personnel expenditure stood at N92.66bn compared with IGR of N35.27bn, while Benue spent N73.94bn on personnel after generating N29.38bn internally.
Similarly, Kogi generated N36.50bn but recorded personnel expenditure of N89.20bn, while Kebbi’s N18.41bn IGR was less than half of its N44.82bn personnel expenditure.
Other states with personnel costs exceeding IGR included Bauchi, Bayelsa, Borno, Cross River, Ebonyi, Edo, Ekiti, Gombe, Imo, Kano, Katsina, Nasarawa, Niger, Ondo, Osun, Oyo, Plateau and Zamfara.
In absolute terms, Oyo recorded the largest gap among the 26 states. The state generated N102.52bn internally but spent N170.04bn on personnel, creating a difference of about N67.51bn.
Yobe followed with a gap of about N60.91bn, while Jigawa recorded N57.39bn. Ondo’s personnel expenditure of N99.58bn exceeded its N45.63bn IGR by N53.94bn, while Kogi recorded a gap of N52.70bn. Bayelsa generated N52.15bn against N98.75bn in personnel expenditure, leaving a difference of N46.60bn.
