At least 26 of the 34 states covered by a new BudgIT report could not generate enough Internally Generated Revenue to cover their personnel expenditure in 2025, leaving a combined shortfall of about N747bn. The states generated approximately N1.16tn in IGR but spent about N1.91tn on personnel costs during the year.
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 from states’ full-year budget implementation reports for 2022 and 2025, excluding Akwa Ibom and Rivers because of incomplete or unavailable data.
BudgIT noted that the figures do not mean states are expected to finance salaries exclusively from IGR, since statutory allocations are a legitimate source of government revenue. However, they highlight the extent to which many states remain dependent on Federation Account allocations to meet basic personnel obligations. Aggregate FAAC allocations rose from N3.43tn in 2022 to N11.38tn in 2025, a 232.06 per cent increase, while aggregate IGR rose from N1.57tn to N4.15tn.
Despite the increase in internally generated revenue, FAAC accounted for 73.3 per cent of the aggregate revenue of the 34 states in 2025, up from 68.7 per cent in 2022. IGR’s share fell from 31.4 per cent to 26.7 per cent over the same period. BudgIT said stronger domestic revenue mobilisation remained essential to improving states’ fiscal sustainability and reducing dependence on federal transfers.
The gap varied widely across states, with Yobe recording the largest personnel burden relative to its IGR. The state generated N15.42bn internally but spent N76.34bn on personnel, leaving a shortfall of N60.91bn. Oyo recorded the largest absolute gap, with N102.52bn in IGR against N170.04bn in personnel expenditure, while Jigawa, Ondo and Kogi recorded shortfalls of N57.39bn, N53.94bn and N52.70bn respectively.
Only eight states, Lagos, Enugu, Ogun, Delta, Kaduna, Kwara, Abia and Anambra, generated more IGR than they spent on personnel in 2025. Lagos accounted for about 44 per cent of the N4.15tn aggregate IGR, generating N1.85tn against personnel expenditure of N333.67bn. Excluding Lagos, the remaining 33 states generated about N2.30tn in IGR against roughly N2.56tn in personnel costs, leaving a combined gap of about N254bn.
The situation nevertheless improved slightly from 2022, when 28 of the 34 states had personnel expenditure above their IGR. Finance Minister Taiwo Oyedele has called for stronger fiscal federalism, improved revenue generation and economic diversification, while economists Akpan Ekpo and Muda Yusuf urged states to increase IGR, attract investment and reduce excessive spending. Yusuf also warned that bloated bureaucracies and political appointments were putting additional pressure on state finances.
