At least 26 Nigerian states are struggling to generate enough Internally Generated Revenue, IGR, to cover their personnel costs, highlighting the continued dependence of many state governments on allocations from the Federation Account.
According to a 2026 report by BudgIT, only eight of the 34 states assessed generated more IGR than they spent on personnel in 2025.
The eight states are Lagos, Enugu, Ogun, Delta, Kaduna, Kwara, Abia and Anambra.
The remaining 26 states collectively generated about N1.16 trillion in IGR but spent approximately N1.91 trillion on personnel, creating a funding gap of about N747 billion.
The report, titled Nigeria’s Economic Reforms: What Has Changed Across Nigeria’s States? An Analysis of State Finances in the Post-Subsidy Years, also showed a significant increase in federal allocations to states.
According to the report, aggregate allocations from the Federation Account Allocation Committee, FAAC, rose from N3.43 trillion in 2022 to N11.38 trillion in 2025.
This represents an increase of more than 230 per cent.
Over the same period, combined IGR increased from N1.57 trillion to N4.15 trillion, representing a 165 per cent rise.
Despite the growth in internally generated revenue, FAAC accounted for a larger share of total state revenue.
The report showed that FAAC’s contribution to aggregate state revenue increased from 68.7 per cent in 2022 to 73.3 per cent in 2025.
By comparison, the contribution of IGR declined from 31.4 per cent to 26.7 per cent.
The figures point to the continued financial dependence of many states on federal allocations, despite efforts to improve domestic revenue generation.
Some states recorded particularly wide gaps between their internally generated revenue and personnel expenditure.
Yobe generated about N15.42 billion in IGR in 2025 but spent N76.34 billion on personnel.
Taraba generated N17.89 billion against personnel expenditure of N55.60 billion, while Sokoto recorded N20.58 billion in IGR compared with N58.65 billion in personnel costs.
In Adamawa, IGR stood at N24.14 billion, while personnel expenditure reached N65.73 billion.
Jigawa generated N35.27 billion but spent N92.66 billion on personnel, while Benue generated N29.38 billion against personnel costs of N73.94 billion.
Oyo recorded the largest absolute gap among the states assessed, generating N102.52 billion in IGR against personnel expenditure of N170.04 billion.
Lagos, however, remained the strongest performer in terms of internally generated revenue.
The state generated approximately N1.85 trillion in IGR in 2025, accounting for about 44 per cent of the N4.15 trillion generated by the 34 states covered by the report.
Lagos also spent about N333.67 billion on personnel, meaning its internally generated revenue was more than five times its personnel expenditure.
Enugu followed with N406.77 billion in IGR against N56.40 billion in personnel costs, while Ogun generated N237.65 billion compared with N151.27 billion in personnel expenditure.
The report suggests that while increased FAAC allocations have provided states with additional financial resources, many governments still face challenges in building sustainable domestic revenue bases.
The development raises questions about the long-term fiscal sustainability of states and their ability to fund recurrent expenditure without relying heavily on federal allocations.
The figures raise questions about the ability of states to build stronger local economies capable of generating sustainable revenue, creating jobs and improving public services.
With federal allocations continuing to provide a significant share of state revenues, the challenge for state governments is to strengthen their Internally Generated Revenue and reduce excessive dependence on FAAC.
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