26 States Struggle to Pay Wages From IGR as FAAC Dependence Grows

At least 26 Nigerian states were unable to generate enough Internally Generated Revenue to cover their personnel costs in 2025, highlighting their continued dependence on allocations from the Federation Account. An analysis by The PUNCH of a new BudgIT report showed that only eight of the 34 states covered by the study generated more IGR than they spent on personnel during the year. The eight states were Lagos, Enugu, Ogun, Delta, Kaduna, Kwara, Abia and Anambra. The remaining 26 states generated a combined N1.16tn in IGR but spent approximately N1.91tn on personnel, leaving a shortfall of about N747bn. The figures were contained 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.” Akwa Ibom and Rivers were excluded from the analysis because of incomplete or unavailable data. The report noted that the figures did not mean states were expected to finance salaries exclusively from IGR, as statutory allocations remain a legitimate source of government revenue. However, the figures demonstrate the extent to which many states would struggle to meet their personnel obligations without federal transfers. Despite a substantial increase in revenue available to state governments following the removal of the petrol subsidy, foreign exchange reforms and higher Federation Account receipts, dependence on FAAC has continued to rise. According to BudgIT, aggregate FAAC allocations to the states increased from N3.43tn in 2022 to N11.38tn in 2025, representing a 232.06 per cent increase. State IGR also rose during the period, increasing from N1.57tn to N4.15tn. However, the growth in FAAC receipts was significantly higher. As a result, FAAC accounted for 73.3 per cent of aggregate state revenue in 2025, up from 68.7 per cent in 2022, while IGR’s share fell from 31.4 per cent to 26.7 per cent. The disparities were particularly striking in some states. Yobe generated N15.42bn in IGR but spent N76.34bn on personnel, while Taraba recorded N17.89bn in IGR against personnel expenditure of N55.60bn. Oyo recorded the largest absolute gap, generating N102.52bn internally compared with N170.04bn spent on personnel. Ondo, Kogi, Jigawa and Bayelsa also recorded significant gaps between their internally generated revenue and personnel costs. The situation, however, improved slightly from 2022, when 28 of the 34 states had personnel expenditure exceeding IGR. Lagos remained the strongest performer, generating N1.85tn in IGR in 2025. Its revenue alone accounted for about 44 per cent of the total IGR generated by the 34 states covered. Excluding Lagos, the other 33 states collectively generated about N2.30tn in IGR against personnel expenditure of roughly N2.56tn. BudgIT said improving domestic revenue mobilisation remained essential to strengthening the long-term fiscal sustainability of state governments. Economists have similarly urged states to attract investment, diversify their economies and reduce unnecessary expenditure to lessen their dependence on federal allocations. The latest figures have therefore renewed calls for stronger fiscal responsibility and improved revenue generation at the state level as Nigeria seeks to build a more sustainable federal system.