26 states lean on FAAC as wage bills outstrip IGR

In 2025, at least 26 state governments were unable to generate sufficient internal revenue to meet their personnel expenses, continuing their reliance on allocations from the Federation Account, despite notable improvements in their financial situations.

An analysis revealed that only eight out of the 34 states examined in a recent BudgIT report managed to generate Internally Generated Revenue (IGR) that exceeded their personnel costs for the year. These eight states include Lagos, Enugu, Ogun, Delta, Kaduna, Kwara, Abia, and Anambra.

The other 26 states collectively generated approximately N1.16 trillion in internal revenue but incurred around N1.91 trillion in personnel expenses, resulting in a deficit of about N747 billion between their total IGR and wage-related expenditures.

These findings are detailed 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 analyzed actual data from states’ full-year budget implementation reports for the years 2022 and 2025. Akwa Ibom and Rivers were excluded from this analysis due to incomplete or unavailable data.

It is important to note that the figures do not suggest that states are expected to cover salaries solely from IGR, as statutory allocations are a valid source of government revenue. However, they do illustrate the challenges many states face in fulfilling their personnel obligations without the revenue provided by the Federation Account Allocation Committee.

This reliance has continued even with the significant increase in revenues available to states following the removal of the petrol subsidy, foreign exchange reforms, and the rise in revenues flowing into the Federation Account.

According to BudgIT, total FAAC allocations surged from N3.43 trillion in 2022 to N11.38 trillion in 2025, marking a 232.06 percent increase and a compound annual growth rate (CAGR) of 50.2 percent.

Similarly, IGR saw a substantial rise, increasing from N1.57 trillion to N4.15 trillion during the same timeframe, although its growth rate of 165.01 percent and CAGR of 38.38 percent fell short of the growth in FAAC allocations.

As a result, states have become increasingly reliant on federal transfers, even as they have generated more revenue internally. In 2022, the Federal Account Allocation Committee (FAAC) constituted 68.7 percent of total state revenue, which rose to 73.3 percent by 2025. In contrast, the share of Internally Generated Revenue (IGR) decreased from 31.4 percent to 26.7 percent.

BudgIT indicated that this trend demonstrates that "despite advancements in domestic revenue mobilization, numerous states continue to depend significantly on transfers from the Federation Account."

It emphasized that enhancing domestic revenue mobilization is crucial for bolstering the long-term fiscal sustainability of states and diminishing their reliance on federal transfers.

The report stated, "While statutory allocations represented a larger portion of the overall revenue increase, reinforcing domestic revenue mobilization is vital for enhancing long-term fiscal sustainability and lessening dependence on federal transfers."

A comparison of states revealed significant disparities between personnel expenditures and internally generated revenue. For instance, Yobe generated merely N15.42 billion internally in 2025 but incurred personnel costs of N76.34 billion. Consequently, its personnel expenses were nearly five times its IGR, resulting in a deficit of approximately N60.91 billion.

Taraba generated N17.89 billion against personnel expenditures of N55.60 billion, indicating that its personnel costs were over three times its IGR. Sokoto reported an IGR of N20.58 billion but had personnel expenditures of N58.65 billion, while Adamawa generated N24.14 billion internally against a personnel bill of N65.73 billion.

Jigawa's personnel expenditure reached N92.66 billion compared to an IGR of N35.27 billion, whereas Benue spent N73.94 billion on personnel after generating N29.38 billion internally.

Likewise, Kogi generated N36.50 billion but faced personnel expenditures of N89.20 billion, while Kebbi's IGR of N18.41 billion was less than half of its personnel expenditure of N44.82 billion.

Other states with personnel costs surpassing their IGR included Bauchi, Bayelsa, Borno, Cross River, Ebonyi, Edo, Ekiti, Gombe, Imo, Kano, Katsina, Nasarawa, Niger, Ondo, Osun, Oyo, Plateau, and Zamfara.

In absolute terms, Oyo recorded the largest gap among the 26 states. The state generated N102.52bn internally but spent N170.04bn on personnel, creating a difference of about N67.51bn.

Yobe followed with a gap of about N60.91bn, while Jigawa recorded N57.39bn. Ondo’s personnel expenditure of N99.58bn exceeded its N45.63bn IGR by N53.94bn, while Kogi recorded a gap of N52.70bn. Bayelsa generated N52.15bn against N98.75bn in personnel expenditure, leaving a difference of N46.60bn.

Some states were much closer to financing their personnel costs internally. Edo generated N98.45bn and spent N99.27bn on personnel, leaving a gap of less than N1bn. Gombe generated N36.36bn compared with personnel expenditure of N53.95bn, while Osun recorded N58.80bn in IGR against N87.46bn in personnel costs.

The data indicated a slight improvement in the situation compared to 2022, when 28 out of 34 states had personnel expenditures that exceeded their Internally Generated Revenue (IGR). By 2025, Abia, Delta, Enugu, and Kwara transitioned from having IGR below their personnel expenditures in 2022 to generating sufficient internal revenue to cover their wage-related expenses. Conversely, Ebonyi and Jigawa experienced a decline in this regard.

The significant size of Lagos' revenue base somewhat masks the challenges of fiscal independence at the state level. In 2025, Lagos generated N1.85 trillion in IGR, a substantial increase from N656.35 billion in 2022. This revenue alone constituted approximately 44 percent of the total N4.15 trillion generated by the 34 states included in the report.

Lagos allocated N333.67 billion for personnel expenses, resulting in its IGR being more than five times its personnel costs. Enugu's IGR reached N406.77 billion, while its personnel expenditure was N56.40 billion. Ogun generated N237.65 billion against personnel costs of N151.27 billion, and Delta reported N206.44 billion in IGR with personnel expenditures of N197.81 billion.

Other states that reported IGR surpassing their personnel expenses included Kaduna, which generated N86.72 billion against N77.63 billion; Kwara, with N85.21 billion compared to N65.22 billion; Abia, generating N66.86 billion against N62.26 billion; and Anambra, which reported N54.24 billion against N39.95 billion.

Lagos' dominance also skews the overall IGR landscape, making it appear significantly stronger than that of an average state. Excluding Lagos, the other 33 states collectively generated approximately N2.30 trillion in 2025, while their total personnel expenditure was around N2.56 trillion, indicating that personnel costs exceeded IGR by about N254 billion.

Enugu also experienced a remarkable increase that contributed positively to the overall IGR figure. Its IGR surged from N25.12 billion in 2022 to N406.77 billion in 2025, marking an increase of N381.66 billion and a compound annual growth rate (CAGR) of 153.01 percent, the highest among the states.

However, BudgIT pointed out that this increase was primarily due to revenues collected by the Enugu State Housing Development Corporation as a result of government interventions in the real estate market.

The organisation expressed reservations about the classification and noted the potentially cyclical nature of the receipts. Niger recorded the second-fastest IGR growth, with collections rising from N12.11bn to N66.37bn, while Abia increased from N14.67bn to N66.86bn.

But not every state benefited from the IGR expansion. Three states recorded lower IGR in 2025 than in 2022. Jigawa suffered the biggest decline, falling from N59.40bn to N35.27bn. Sokoto’s IGR dropped from N23.60bn to N20.58bn, while Ebonyi declined marginally from N23.89bn to N23.25bn.

Jigawa's situation was notably important as its personnel expenses surged from N52.37 billion in 2022 to N92.66 billion in 2025, while its Internally Generated Revenue (IGR) decreased, significantly heightening its reliance on alternative revenue streams.

The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, recently advocated for enhanced fiscal federalism, improved revenue generation, and economic diversification to bolster Nigeria's resilience against economic shocks. The minister made these remarks in Owerri, the capital of Imo State, during the 2026 National Council on Finance and Economic Development Retreat.

Addressing the theme 'Strengthening Fiscal Federalism for Equity, Sustainable Development and Economic Resilience in a Volatile Global Economy,' Oyedele emphasized the need for the retreat to examine the existing allocation and derivation principles. He also called for increased fiscal responsibility, accountability, and collaboration among Nigeria's three tiers of government to foster sustainable economic growth.

The minister urged state governments across the nation to enhance their Internally Generated Revenue, attract investments, and create employment opportunities instead of heavily depending on federal allocations.