The World Bank has disclosed that 26 Nigerian states increased their expenditure faster than their revenue growth between 2023 and 2025, despite receiving significantly higher allocations from the Federation Account following the Federal Government’s economic reforms.

The finding has raised fresh questions about public financial management, budget discipline and the priorities of state governments, particularly as millions of Nigerians continue to grapple with rising living costs, inadequate infrastructure and limited access to essential public services.

According to the World Bank, expenditure growth exceeded revenue growth in 26 of the 34 states with comparable financial data during the period, indicating that several state governments expanded their spending at a faster pace than their internally generated and federally allocated resources increased.

The findings were contained in the bank’s October 2026 Nigeria Development Update, titled Beyond the Federal Purse: How Higher Revenues Shaped State Priorities.

The report examined how state governments deployed additional financial resources following the removal of petrol subsidies, reforms to the foreign exchange system and improvements in revenue administration introduced under President Bola Tinubu’s administration.

The World Bank disclosed that median expenditure growth across the states assessed reached 134 per cent between 2023 and 2025, compared with median revenue growth of 79 per cent.

It identified Abia, Kaduna, Benue and Gombe among the states that recorded particularly significant differences between revenue and expenditure growth.

“The spending response to higher revenues varied considerably across states. Between 2023 and 2025, expenditure growth in real terms exceeded revenue growth in 26 of the 34 states with available data,” the bank stated.

However, six states recorded the opposite trend, with revenue growth exceeding expenditure growth. They are Akwa Ibom, Enugu, Kano, Katsina, Niger and Taraba.

Ekiti and Ogun recorded broadly similar growth rates in revenue and expenditure.

The World Bank noted that the differences did not follow any clear geographical or economic pattern, suggesting that individual state fiscal decisions and spending priorities played important roles in determining how additional resources were utilised.

The increase in state government spending came amid a substantial rise in financial allocations available to the three tiers of government following the Federal Government’s economic reforms.

According to the World Bank, gross federation revenues increased by 69 per cent in real terms between 2023 and 2025, while the amount available for distribution among the federal, state and local governments rose by 60 per cent.

State governments recorded the largest increase in their share of federation revenue, with allocations rising by approximately 129.5 per cent.

This compared with an increase of 40.8 per cent for the Federal Government and 100.7 per cent for local governments.

Using constant 2019 prices to account for inflation, the report showed that states’ share of federation revenues increased from ₦3.21 trillion in 2023 to ₦7.37 trillion in 2025.

The World Bank attributed the increase to several factors, including the removal of petrol subsidies, exchange rate unification, improved revenue administration, refunds and the settlement of outstanding federal obligations to state governments.

The additional resources significantly expanded the fiscal space available to state administrations, providing opportunities to increase infrastructure investment, improve public services and strengthen their financial positions.

The bank, however, observed that the increase in available revenue did not translate into uniform spending patterns across the states.

Although aggregate state revenues increased by approximately 93 per cent in real terms between 2023 and 2025, total expenditure also rose by about 92 per cent.

This meant that overall revenue growth slightly exceeded expenditure growth across the states combined, even though spending expanded faster than revenue in most of the individual states examined.

The World Bank report also highlighted a significant increase in capital expenditure, indicating that state governments channelled substantial portions of their additional resources into infrastructure and other development projects.

Capital expenditure increased by 151 per cent in real terms between 2023 and 2025, raising its share of total state government spending from approximately 48 per cent to 61 per cent.

Transport infrastructure accounted for a considerable portion of the increase.

According to the report, expenditure on roads and other transport projects rose from approximately ₦100 billion in 2021 to ₦2.5 trillion in 2025.

The amount represented 26.5 per cent of total state government expenditure in 2025.

The increase reflects the growing priority given to road construction, transportation networks and other economic infrastructure by state governments.

While investments in roads and transport infrastructure can improve connectivity, facilitate trade and support economic activities, the World Bank’s findings also raise questions about the balance between infrastructure spending and investments in human development.

Despite the substantial increase in government revenues, the World Bank observed that spending on education, healthcare and social protection grew more slowly than investments in economic infrastructure.

Education expenditure increased from approximately ₦500 billion in 2021 to ₦1.1 trillion in 2025.

However, its share of total state government expenditure declined from 14.9 per cent to 12.1 per cent during the period.

Similarly, healthcare spending increased from approximately ₦200 billion to ₦700 billion, but its share of total expenditure fell slightly from 7.4 per cent to 7.1 per cent.

The findings suggest that although states committed more money in absolute terms to education and healthcare, these sectors did not benefit proportionately from the overall expansion in government spending.

The bank further observed that some states with weaker human development indicators allocated considerably more resources to transport infrastructure than to education, healthcare and other essential social services.

This development highlights the importance of evaluating government expenditure not only by the amount spent but also by its impact on the welfare and living conditions of citizens.

For many Nigerians, access to affordable healthcare, quality education, improved schools, functional hospitals and social protection remains an important measure of whether increased government revenues are translating into meaningful improvements in living standards.

Beyond the differences in revenue and expenditure growth, the World Bank warned that increased allocations had not eliminated longstanding weaknesses in public financial management across several states.

The report identified budget credibility as an important area requiring improvement, noting that approved government budgets frequently exceeded the financial resources and implementation capacity available to state administrations.

This often resulted in significant differences between approved spending plans and actual expenditure, particularly in capital projects.

The bank explained that unexpected increases in revenue sometimes prompted supplementary budgets and adjustments to existing spending plans during the financial year.

As a result, actual spending often diverges substantially from approved plans, weakening the budget’s role as a credible statement of government priorities and making it harder to assess whether resources are being used as intended,” the report stated.

The observation underscores the need for stronger budget preparation, transparent procurement processes, effective project monitoring and improved accountability in the management of public funds.

According to the World Bank, state governments must strengthen their financial management systems to ensure that additional revenues are deployed efficiently and translated into measurable development outcomes.

It also recommended stronger expenditure controls, improved monitoring of public projects and more effective government debt management.

The findings come amid growing public expectations that increased federal allocations should translate into improved infrastructure, better healthcare, quality education, employment opportunities and other essential services.

Following the removal of petrol subsidies and other economic reforms, state governments have received substantially higher allocations from the Federation Account.

However, the World Bank’s analysis indicates that increased revenue alone does not guarantee better development outcomes, particularly where spending priorities, budget implementation and accountability mechanisms remain weak.

For citizens, the central issue is whether the additional resources available to state governments are producing visible improvements in their communities.

The increase in capital expenditure provides opportunities for states to address infrastructure deficits, while the slower growth in the relative share of education and healthcare spending raises questions about how governments are balancing physical infrastructure with investments in human capital.

The report also highlights the importance of fiscal discipline, as expenditure growth that consistently outpaces revenue growth could create financial pressures if not supported by sustainable revenue sources and effective debt management.

Ultimately, the World Bank’s findings place renewed attention on how Nigerian state governments manage public resources and whether the additional revenues generated by recent economic reforms are delivering the development benefits expected by citizens.

As state governments prepare future budgets, the challenge will be to balance infrastructure development with education, healthcare, social protection and other essential services while ensuring that every additional naira is used transparently and efficiently.

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