Most states still rely on federal funding
The widening gap between federally distributed revenue and internally generated income is exposing a persistent weakness in Nigeria’s subnational finances, with 28 states receiving more from FAAC in five months than they generated internally throughout 2025.
The states collectively received N2.64 trillion from the Federation Account Allocation Committee (FAAC) between January and May 2026, compared with N1.387 trillion in internally generated revenue (IGR) for the whole of 2025, according to BudgIT.
FAAC Receipts Outpace IGR
The five-month FAAC receipts were N1.255 trillion, or 90.5 per cent, higher than the states’ combined annual IGR.
BudgIT’s report, Nigeria’s Economic Reforms: What Has Changed Across Nigeria’s States? An Analysis of State Finances in the Post-Subsidy Years, found that 34 states generated N4.147 trillion in IGR in 2025, up from N1.565 trillion in 2022.
FAAC allocations to states rose much more sharply, from N3.427 trillion in 2022 to N11.378 trillion in 2025.
Dependence on FAAC
Consequently, the share of FAAC in aggregate state revenue increased from 68.7 per cent to 73.3 per cent, while IGR’s contribution fell from 31.4 per cent to 26.7 per cent.
The dependence is most visible in states with relatively weak domestic revenue bases.
Bayelsa recorded the largest gap, receiving N221.84 billion in net FAAC allocations in the first five months of 2026 against N52.15 billion in IGR in 2025.
Its five-month FAAC receipts were therefore N169.69 billion, or 325.4 per cent, higher than what it generated internally in an entire year.
States with Significant Gaps
Delta received N275.09 billion from FAAC against N206.44 billion in 2025 IGR, while Kebbi collected N82.62 billion against IGR of N18.41 billion.
Sokoto’s five-month FAAC receipts reached N83.85 billion, compared with N20.58 billion in annual IGR.
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Yobe received N77.18 billion, more than five times its 2025 IGR of N15.42 billion, while Taraba collected N79.46 billion against N17.89 billion generated internally.
Adamawa received N81.16 billion from FAAC compared with N24.14 billion in IGR, while Benue received N86.15 billion against N29.38 billion.
The pattern extended across Borno, Imo, Ondo, Jigawa, Zamfara, Ebonyi, Plateau, Kogi, Anambra, Gombe, Katsina, Bauchi, Nasarawa, Kano, Abia, Niger, Oyo, Ekiti, Osun and Cross River.
Cross River was the closest to breaking even, with N57.54 billion in five-month FAAC receipts against N57.45 billion in full-year 2025 IGR — a difference of only about N90 million.
Outliers and Revenue Growth
Only six of the 34 states analysed generated more IGR in 2025 than they received from FAAC during the first five months of 2026.
Lagos was by far the strongest outlier. The state generated N1.845 trillion in IGR in 2025, compared with N320.09 billion received from FAAC between January and May 2026.
Enugu recorded the second-largest gap, generating N406.77 billion in IGR against N78.34 billion in five-month FAAC receipts; a difference of N328.43 billion.
States like Enugu, which have shown significant revenue growth, could serve as models for other states looking to reduce their dependence on FAAC allocations.
Enugu recorded the fastest growth between 2022 and 2025, with IGR climbing from N25.12 billion to N406.77 billion.
Lagos posted the largest absolute increase, adding about N1.19 trillion to its internally generated revenue over the same period.
However, the gains have not been evenly distributed.
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Ebonyi’s IGR declined from N23.89 billion in 2022 to N23.25 billion in 2025.
The contrasting performances show that the reform period has produced markedly different outcomes across states, depending on the depth of their tax bases, economic activity and capacity to mobilise non-oil revenue.
The revenue story also raises concerns about how effectively the additional resources are reaching households.
BudgIT found that personnel expenditure grew much more slowly than total state revenue, indicating that increases in government resources did not translate proportionately into wage growth.
With inflation eroding household purchasing power, the slower growth in personnel expenditure potentially limits the extent to which increased government revenue feeds directly into household welfare.
BudgIT attributed the expansion in FAAC distributions to factors including currency devaluation, improved tax collection and higher oil revenues.
The scale of the imbalance becomes clearer when state revenue is measured against the size of federal transfers.
Kebbi raised N11.37 billion from its own sources in 12 months, but received N82.62 billion from FAAC in just five months.
Yobe generated N11.08 billion internally during 2025, while N77.18 billion flowed to the state from FAAC over the first five months of 2026.
The contrast points to more than a revenue shortfall. It reveals a fundamental weakness in the fiscal architecture of many Nigerian states.
Until that gap narrows, higher FAAC receipts may continue to expand state budgets without necessarily making state finances more resilient or self-sustaining.
