Lagos and Enugu are Nigeria's only states that can fund their own budgets, World Bank says

Why it matters

The World Bank's October 2026 Nigeria Development Update, titled 'Beyond the Federal Purse: How Higher Revenues Shaped State Priorities,' finds that in 2025, only Lagos and Enugu raised enough internally generated revenue (IGR) to cover their recurrent expenditure — IGR equivalent to 160% of recurrent spending in Lagos and 377% in Enugu — underscoring the wide gap among states in breaking free from dependence on federal allocations.

The report says states' IGR covered an average of about 40% of recurrent expenditure between 2021 and 2023, improving to roughly 50% in 2024 and 2025, yet most states still rely on federal allocations to pay salaries and run their administrations. In aggregate, states' IGR grew 55% in real terms between 2023 and 2025, driven by digitized tax systems; Enugu's collections rose from N25 billion to N209 billion.

The Bank warns that states unable to finance their recurrent spending from their own resources face significant fiscal risk — if federal revenues decline, they could struggle to pay salaries and sustain essential public services. The report also notes state capital spending rose 151% in real terms between 2023 and 2025, but education and health spending lagged: education's share of total spending fell from 14.9% in 2021 to 12.1% in 2025.

World Bank Country Director for Nigeria Mathew Verghis said the expanded fiscal space gives states an opportunity to improve infrastructure, education, health and water, provided spending efficiency and accountability improve. The Bank projects Nigeria's economy will grow an average of 4.4% between 2026 and 2028 if reforms continue.