The World Bank says 26 Nigerian states increased spending faster than their revenues between 2023 and 2025, despite receiving substantially higher federal allocations following recent economic reforms.

The bank said median expenditure growth across the states assessed reached 134 per cent during the period, compared with median revenue growth of 79 per cent, showing differences in how state governments managed their growing financial resources.

The findings were contained in the World Bank’s October 2026 Nigeria Development Update, titled Beyond the Federal Purse: How Higher Revenues Shaped State Priorities.

The report examined how state governments used additional revenues following the removal of petrol subsidies, changes to the foreign exchange system and improvements in tax collection.

According to the World Bank, expenditure grew faster than revenue in 26 of the 34 states with comparable data, with Abia, Kaduna, Benue and Gombe recording particularly large gaps.

“The spending response to higher revenues varied considerably across states. Between 2023 and 2025, expenditure growth in real terms exceeded revenue growth in 26 of the 34 states with available data,” the bank stated.

It identified Akwa Ibom, Enugu, Kano, Katsina, Niger, and Taraba as the six states where revenue growth exceeded expenditure growth. Ekiti and Ogun recorded largely similar growth rates in both categories.

The report noted that the differences did not follow any clear geographical or economic pattern.

Spending increased sharply as funds available to state governments rose after President Bola Tinubu’s economic policies since 2023.

According to the World Bank, gross federation revenues increased by 69 per cent in real terms between 2023 and 2025, while the amount available for distribution among the three tiers of government rose by 60 per cent.

State governments recorded the largest increase in federation revenue allocations, with their share rising by approximately 129.5 per cent, compared with 40.8 per cent for the federal government and 100.7 per cent for local governments.

The figures, calculated using constant 2019 prices to account for inflation, showed that states’ share of federation revenues increased from N3.21 trillion in 2023 to N7.37 trillion in 2025.

The bank attributed the increase to exchange rate unification, the removal of petrol subsidies, improved revenue administration, refunds and the settlement of outstanding federal obligations to states.

It also found that aggregate state revenues rose by approximately 93 per cent in real terms between 2023 and 2025, while total expenditure increased by about 92 per cent.

Although overall revenue growth slightly exceeded expenditure growth across the states combined, the situation differed considerably by state.

The bank explained that the additional funds allowed state governments to increase capital spending, meet infrastructure needs and reduce some of their debt obligations.

Capital expenditure rose by 151 per cent in real terms between 2023 and 2025, increasing its share of total state spending from about 48 per cent to 61 per cent.

Transport infrastructure accounted for a substantial portion of the increase, with spending on roads and other transport projects rising sharply.

The report showed that transport expenditure increased from approximately N100 billion in 2021 to N2.5 trillion in 2025, accounting for 26.5 per cent of total state expenditure.

Despite the increase in available resources, the World Bank found that spending on education, healthcare and social protection grew more slowly than investment in economic infrastructure.

Education expenditure rose from about N500 billion in 2021 to N1.1 trillion in 2025, but its share of total state spending fell from 14.9 per cent to 12.1 per cent.

Similarly, healthcare spending increased from about N200 billion to N700 billion, while its share of total expenditure fell slightly from 7.4 per cent to 7.1 per cent.

The bank observed that some states with weaker human development indicators devoted considerably more resources to transport infrastructure than to education, healthcare and other social services.

The report also warned that higher revenues had not eliminated weaknesses in state financial management.

“Budget credibility remains an area for improvement in many states,” it stated.

It explained that approved budgets frequently exceeded the resources and implementation capacity available to state governments, resulting in spending shortfalls, particularly on capital projects.

The bank noted that unexpected revenue increases sometimes prompted supplementary budgets and changes to spending plans during the financial year.

“As a result, actual spending often diverges substantially from approved plans, weakening the budget’s role as a credible statement of government priorities and making it harder to assess whether resources are being used as intended,” the report stated.

The World Bank urged state governments to strengthen financial management, improve budget implementation and ensure that increased revenues translate into better public services.

It also recommended stronger controls over spending, improved monitoring of public projects, and more effective management of government debt.

The findings come amid continuing questions about how state governments are using the additional funds made available through federal economic reforms, particularly as many Nigerians continue to face high living costs and inadequate public services.