The World Bank has raised concerns over the spending priorities of Nigerian state governments, saying increased revenue following recent economic reforms has not resulted in corresponding investments in education, healthcare and social protection.
The global financial institution noted that although states had increased funding for essential public services, spending on transport infrastructure had grown significantly faster, including in states with poor human development indicators.
A Senior Economist at the World Bank Nigeria Office, Gloria Joseph-Raji, made this known on Tuesday in Abuja at the launch of BudgIT’s 2026 State of States Report, themed ‘From Allocation to Impact: Rethinking State Spending Priorities’.
She said expenditure on education, healthcare and social protection had increased considerably but remained below the pace of investment in transport infrastructure.
Joseph-Raji explained that the World Bank’s October Nigeria Development Update, which reviewed budget implementation reports across all 36 states, showed that governments had expanded infrastructure spending while reducing their debt obligations, particularly domestic debt.
She attributed the increase in state revenues to the removal of petrol subsidies, exchange rate unification and improved tax administration since 2023. She also identified federal intervention funds and the settlement of outstanding obligations to states as contributing factors.
According to her, the additional revenue had helped state governments meet salary obligations while creating room for better public service delivery.
However, she warned that heavy dependence on Federation Account allocations continued to make state finances vulnerable 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.
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She disclosed that federation transfers represented 73 per cent of aggregate state revenue between 2021 and 2025, excluding Lagos, while internally generated revenue was sufficient to finance recurrent expenditure in only two states.
Joseph-Raji further noted that states received 26.72 per cent of net Federation Account revenues and now benefit from 55 per cent of Value Added Tax revenue under the revised sharing formula.
Meanwhile, BudgIT’s Country Director, Vahyala Kwaga, said the combined revenue of the 34 states included in the organisation’s comparative analysis increased from N4.99tn in 2022 to N15.53tn in 2025, representing a growth of N10.54tn.
He added that allocations from the Federation Account Allocation Committee rose by more than 232 per cent, from N3.43tn to N11.38tn within the same period.
Despite the significant revenue increase, Kwaga disclosed that the states had spent just N8.60tn, representing 24.4 per cent of their combined N35.22tn approved budgets, by June 2026.
He stressed the need to assess how governments utilise available resources, their spending priorities and whether public expenditure translates into meaningful improvements in citizens’ lives.
Kwaga also explained that BudgIT had adjusted its assessment framework to give greater attention to spending on education, healthcare, agriculture, water and sanitation, alongside revenue generation and debt sustainability.
Presenting the report, BudgIT’s Head of Research and Policy Advisory, Adejoke Akinbode, revealed that the combined debt profile of 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 state with the highest debt at N2.9tn, while Osun spent N100.17bn on debt servicing, accounting for 28.6 per cent of its revenue.
Akinbode said Lagos ranked first in the report’s overall fiscal sustainability assessment, followed by Enugu, Bayelsa, Delta and Kebbi, while Cross River occupied the last position. Rivers State was excluded because of insufficient fiscal data.
She urged state governments to cut administrative expenses, improve revenue collection and ensure that borrowed funds were channelled into productive investments.
An economist and lecturer at Amadeus University, Abia State, Dr Iboro Nelson, argued that the increase in government revenue had not adequately cushioned households against the economic difficulties associated with recent reforms.
She disclosed that state governments collectively budgeted N1.32tn for healthcare in 2024 but spent only N816.64bn. For education, the states allocated N2.41tn but recorded expenditure of N1.61tn.
According to her, average annual expenditure per resident stood at N3,483 for healthcare and N6,981 for education, translating to approximately N290 and N582 monthly, respectively.
“This is actually not fiscal space, but fiscal illusion,” she said.
Nelson attributed the limited impact of increased government allocations to poor budget implementation, unrealistic spending projections, duplication of projects and high recurrent expenditure.
Joy Ehinor-Esezobor, a Programme Manager at the Ford Foundation’s West Africa Office, urged governments to measure fiscal performance by improvements in citizens’ welfare rather than revenue increases or rankings.
She said the ultimate measure of success should be improved public services and better living conditions for Nigerians.
PUNCH
