By Obasola Olatunde
A new report by the BudgIT Foundation has revealed that many Nigerian state still battle with the challenge of improving Internally Generated Revenue (IGR) with most states overly dependent on federal allocations.
The 2025 edition of the civic group’s State of States Report paints a sobering picture of Nigeria’s fiscal landscape, showing that only a few states demonstrate genuine financial independence while the majority struggle to generate enough internal revenue to sustain basic operations.
Analysing the findings on Channels Television, BudgIT’s Deputy Country Director, Vahyala Kwaga, noted that the report “provides insight and analysis into what you could call the physical health of the 36 states of the federation,” confirming the realities Nigerians often complain about.
The report ranked Anambra State as the best performing state on the fiscal sustainability index in 2025, followed by Lagos, Kwara, Abia, and Edo.
These top states were commended for demonstrating stronger fiscal discipline, improved revenue generation, and higher capital investment.
Conversely, the states at the bottom of the index were Imo, Kogi, Jigawa, Benue, and Yobe, all struggling significantly with weak Internally Generated Revenue (IGR) performance and a high dependency on monthly federal allocations.
According to BudgIT’s data, only two states proved fully capable of self-sustaining their operations without external funding: Enugu State, which recorded an impressive 146.68% IGR to operating expense ratio, and Lagos State, which stood at 120.87%.
The report revealed a worrisome growth in total subnational debt, which expanded by 6.8% rising from ₦9.89 trillion in 2023 to ₦10.57 trillion in 2024. Lagos, Kaduna, Edo, Ogun, and Bauchi collectively accounted for more than half of this total debt burden.
Even more concerning is the exposure to exchange rate risks, as 24 states now owe over half of their debt to foreign creditors, creating significant repayment pressure.
In expenditure, Abia State emerged as the most development-focused, channeling an impressive 77.05%} of its spending into capital projects.
However, several other states—including Bauchi, Ekiti, Delta, Benue, Oyo, and Ogun—were flagged for dedicating more than 60% of their budgets to recurrent expenses such as salaries and overheads.
Experts noted that the report serves as a national alarm regarding Nigeria’s structural weaknesses.
Analysts argue that many states are operating as administrative outposts rather than economic engines, demonstrating poor capacity to mobilize domestic revenue or attract sustainable investment.
“The findings show that too many states are fiscally dependent and not economically productive,” a BudgIT analyst stated. “Nigeria cannot achieve true federalism if the states remain financially handicapped.”
The report, titled “A Decade of Subnational Fiscal Analysis: Growth, Decline and Middling Performance,” urged governors to expand their revenue base, invest in productive sectors, and prioritize capital over recurrent spending to build long-term resilience.
It also called for stronger fiscal accountability and citizen engagement in budget processes.
As Kwaga aptly summarized, “The health of Nigeria’s federation depends on the health of its states and right now, too many are unwell.”
