Most Nigerian States Rely on Federal Allocations for Salaries

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A substantial majority of Nigerian state governments remain deeply dependent on federal allocations to meet basic payroll obligations, despite broad fiscal improvements in recent years. A comprehensive financial analysis reveals that at least 26 states failed to generate enough Internally Generated Revenue (IGR) to cover their personnel costs in 2025. This leaves the majority of subnational governments vulnerable to external economic shocks and central revenue fluctuations.

According to data evaluated from civic tech organization BudgIT’s report titled ‘Nigeria’s Economic Reforms: What Has Changed Across Nigeria’s States? An Analysis of State Finances in the Post-Subsidy Years’, only eight out of 34 states reviewed generated sufficient internal revenue to clear their wage bills independently. The performing states include Lagos, Enugu, Ogun, Delta, Kaduna, Kwara, Abia, and Anambra. Data for Akwa Ibom and Rivers were excluded due to incomplete financial reporting.

For the remaining 26 states, internal revenue performance fell significantly short of public sector wage requirements. These states collectively generated ₦1.16 trillion in IGR while spending roughly ₦1.91 trillion on personnel expenditure during the same period. The deficit left an aggregate funding gap of approximately ₦747 billion that had to be bridged through monthly federal distributions.

The figures highlight a structural vulnerability in subnational governance across Nigeria. While states are legally entitled to statutory distributions from the Federation Account Allocation Committee (FAAC) to fund public expenditures, heavy reliance on central disbursements leaves little room for fiscal independence or long-term financial stability.

The BudgIT analysis evaluated full-year budget implementation reports across states, tracking financial trends between 2022 and 2025 following key national macroeconomic reforms. Although post-subsidy revenue allocations to state coffers increased overall during this timeframe, internal tax collection and commercial revenue generation mechanisms in most regions lagged behind rising operational costs.

Without sustained efforts to broaden local tax bases, drive domestic investment, and streamline public payrolls, most Nigerian states will remain tightly bound to federal allocations just to meet basic civil service wage bills.