By Kehinde Ibrahim, Lagos
NIGERIA’S state governments are facing renewed scrutiny over their ability to translate growing financial resources into meaningful economic development, following revelations that 34 states spent only N8.60 trillion out of their combined N35.22 trillion approved budgets in the first half of 2026. The expenditure represents just 24.4 per cent of their total budgetary provisions, raising concerns about fiscal discipline, budget implementation and the effectiveness of public financial management at the subnational level.
Despite benefiting from significantly higher allocations from the Federation Account following the removal of the petrol subsidy and exchange rate reforms, the states collectively left N26.62 trillion of their approved expenditure unexecuted as of June. The development highlights a growing concern that increased government revenues are not translating into commensurate improvements in infrastructure, public services and the living conditions of millions of Nigerians.
The findings, contained in the 11th edition of BudgIT’s State of States Report, present a troubling picture of budget implementation across the 34 states covered by the organisation’s assessment. Beyond the headline figures, the report raises questions about the priorities of state governments, their capacity to execute capital projects and the extent to which public expenditure is addressing the development challenges confronting their respective populations.
Speaking at the launch of the report, Country Director of BudgIT, Vahyala Kwaga, said the latest expenditure figures demonstrated the need for a more critical assessment of how governments manage public resources.
According to him, the assessment of state fiscal performance should not be restricted to revenue generation, annual budget approvals or the volume of allocations received from the Federation Account. Rather, attention must also focus on how much of the available resources governments actually spend, the sectors receiving the funding and the tangible benefits citizens derive from such expenditure.
“Our H1 2026 expenditure analysis offers another perspective. Across 34 states, a combined N35.22 trillion had been budgeted, but only N8.60 trillion had been spent by the end of June, representing 24.4 per cent of the combined approved budgets.
“This tells us that the conversation cannot end with how much money states receive or how much they budget. We must also examine how effectively they deploy the resources available to them, what they prioritise and whether their spending is delivering the outcomes that citizens need,” Kwaga said.
The figures are particularly significant because they come at a time when state governments have experienced a substantial expansion in their revenue base. The removal of the petrol subsidy in May 2023 and subsequent exchange rate reforms significantly altered the country’s fiscal structure, increasing the naira value of revenues available for distribution among the three tiers of government.
For state governments, the reforms have translated into considerably higher monthly allocations from the Federation Account. The increased inflows have provided opportunities to strengthen public finances, reduce dependence on borrowing and accelerate investments in critical infrastructure and human development.
However, BudgIT’s findings suggest that the expansion in fiscal resources has not been matched by a corresponding improvement in the pace of budget execution.
An analysis of the financial performance of the 34 states between 2022 and 2025 showed that their combined revenue increased from approximately N4.99 trillion in 2022 to N15.53 trillion in 2025.
This represents an increase of about 211 per cent within three years, reflecting the considerable improvement in the financial resources available to subnational governments.
Similarly, receipts from the Federation Account Allocation Committee (FAAC) rose from N3.43 trillion in 2022 to N11.38 trillion in 2025, representing an increase of more than 232 per cent.
The figures underscore the extent to which the fiscal environment of state governments has changed since the implementation of major federal economic reforms.
For many states, higher allocations have provided additional room to finance road construction, upgrade healthcare facilities, improve schools, expand access to potable water and support agricultural development.
Nevertheless, the critical question remains whether these opportunities are being adequately utilised.
Kwaga observed that the scale of the revenue increase should have enabled state governments to make significant progress in addressing longstanding development challenges, particularly infrastructure deficiencies, inadequate healthcare facilities and weaknesses in the education system.
“We are now firmly in the post-subsidy removal era. The fiscal landscape of our states has changed considerably, with trillions of naira in allocations flowing from the Federation Account to subnational governments.
“These are substantial changes. State governments now have access to resources at a scale that should create greater opportunities to address longstanding development deficits,” he said.
His comments reflect a broader concern about the relationship between government revenue and development outcomes. While higher allocations are important for improving fiscal capacity, their significance ultimately depends on how effectively the resources are managed and deployed.
For citizens, the benefits of increased public revenue should be reflected in improved public infrastructure, accessible healthcare, quality education, employment opportunities, agricultural productivity and a more reliable supply of essential services.
Where these improvements remain limited despite substantial increases in government revenue, questions about expenditure efficiency, transparency and accountability become unavoidable.
The situation also raises concerns about the credibility of annual budgets presented by state governments. Budgets are expected to serve as practical financial instruments through which governments translate development priorities into measurable programmes and projects.
However, when a significant proportion of approved expenditure remains unexecuted halfway through the financial year, it becomes necessary to examine whether the budget assumptions were realistic, whether implementation capacity was adequate and whether the projects and programmes were properly prioritised.
Although budget execution can be influenced by several factors, including procurement delays, administrative bottlenecks, revenue uncertainties and the timing of fund releases, the scale of the shortfall identified by BudgIT deserves serious attention.
The combined expenditure performance of 24.4 per cent across the 34 states indicates that a substantial portion of planned government activities had yet to translate into actual spending by the end of June.
This has implications for the delivery of public services, particularly where capital projects are concerned.
For instance, delays in releasing funds for road construction, hospital rehabilitation, school infrastructure and water projects can extend project completion timelines, increase construction costs and postpone the benefits expected by communities.
In an economy where households and businesses are already dealing with high living costs, infrastructure deficiencies and limited access to essential services, weak budget implementation could further undermine the effectiveness of government intervention.
The concern is not simply that states have unspent balances in their accounts. Rather, it is whether the resources allocated for addressing pressing social and economic challenges are being deployed at the pace required to produce meaningful results.
A government may record impressive revenue growth and approve an ambitious annual budget, but such achievements have limited developmental value if the projects and programmes contained in the budget are not implemented.
This distinction between budgetary allocations and actual expenditure is central to understanding the issues raised in BudgIT’s latest report.
For years, fiscal assessments of state governments have largely focused on revenue generation, internally generated revenue, debt obligations and the sustainability of public finances. While these indicators remain important, they do not necessarily provide a complete picture of the quality of governance or the impact of public spending.
A state may have a relatively strong revenue position and manageable debt levels but still perform poorly in delivering essential services if its expenditure is poorly prioritised or implementation remains weak.
Recognising this limitation, BudgIT has introduced a substantially revised methodology for its 11th State of States Report.
The revised framework seeks to move the assessment beyond conventional measures of fiscal sustainability to examine more closely how public resources are allocated and whether government expenditure contributes to measurable improvements in citizens’ welfare.
Kwaga explained that previous assessment frameworks provided useful information on the financial sustainability of state governments but did not sufficiently establish whether public spending was producing the development outcomes expected by citizens.
The new methodology therefore places greater emphasis on the quality, composition and developmental orientation of public expenditure.
Under the revised framework, the organisation examines how state governments allocate resources to critical sectors, including healthcare, education, agriculture, water, sanitation and hygiene.
These sectors are particularly important because they directly influence the quality of life, productivity and long-term economic prospects of citizens.
Investment in healthcare, for instance, is essential for improving access to medical services, reducing preventable deaths and strengthening the capacity of communities to participate productively in economic activities.
Similarly, adequate funding for education is necessary to improve school infrastructure, address shortages of learning materials, strengthen teaching capacity and equip young people with the skills required in an increasingly competitive labour market.
Agriculture also remains central to Nigeria’s economic development, particularly in the context of food inflation, rising production costs and concerns over food security.
State governments have important responsibilities in supporting agricultural production through rural roads, irrigation facilities, extension services, storage infrastructure and access to markets.
Likewise, investment in water supply, sanitation and hygiene is essential for improving public health and reducing the economic and social costs associated with inadequate access to basic amenities.
By incorporating these sectors into its assessment, BudgIT is seeking to establish a clearer connection between government expenditure and the actual development needs of the population.
The report also tracks the execution of budgeted projects, an important component of public financial accountability.
This is significant because approved expenditure figures alone cannot establish whether a government has delivered the projects it promised.
A state may allocate billions of naira to infrastructure development, education or healthcare without necessarily completing the projects or ensuring that the intended beneficiaries receive the services.
Consequently, tracking actual project execution provides a more practical basis for determining whether public expenditure is producing the expected outcomes.
The revised approach also places greater responsibility on state governments to demonstrate that their spending decisions are supported by clear development objectives and measurable results.
For the states, the challenge is no longer simply to secure higher allocations or present larger annual budgets. It is to establish credible implementation systems that can translate available resources into completed projects and sustainable public services.
This requires improvements in procurement processes, project planning, monitoring and evaluation, financial reporting and institutional capacity.
State governments must also strengthen the link between budget preparation and actual development priorities. Where budgets are prepared without adequate consideration of implementation capacity, they risk becoming documents of political ambition rather than practical instruments of economic transformation.
Another important issue is the need for greater transparency in the management of public funds.
Citizens should be able to determine how much their governments receive, how much they spend, which projects receive funding and whether those projects are completed according to approved specifications.
Regular publication of budget performance reports, accessible procurement information and credible project monitoring mechanisms would help strengthen public confidence in government institutions.
The role of state assemblies is equally important. Legislators are expected to provide effective oversight of executive expenditure and ensure that appropriated funds are utilised for the purposes approved by law.
Where implementation falls significantly below budgetary targets, state assemblies should demand explanations from ministries, departments and agencies responsible for the affected projects.
Similarly, audit institutions must strengthen their capacity to examine government expenditure and identify irregularities, inefficiencies and weaknesses in financial management.
Civil society organisations and the media also have an important responsibility to examine government spending beyond official announcements and budget presentations.
The increasing availability of fiscal information provides opportunities for independent organisations to compare budgetary commitments with actual performance and draw attention to gaps that may otherwise remain unnoticed.
However, the effectiveness of such scrutiny will depend on the willingness of governments to provide timely, comprehensive and verifiable financial information.
BudgIT has therefore urged citizens, civil society organisations, journalists and policymakers to use the findings of the State of States Report as a basis for demanding greater accountability from elected officials.
Kwaga said the organisation wanted the report to influence public discussions on fiscal priorities and ensure that information about government finances translated into stronger demands for improved governance.
“We want the findings of the State of States to travel beyond this room. We want journalists to interrogate them, civil society organisations to use them in their advocacy, policymakers to engage with them in shaping fiscal priorities, and citizens to use the evidence to demand better from their governments,” he said.
The call is particularly relevant given the economic pressures facing households and businesses across the country.
Despite improvements in government revenues, many Nigerians continue to grapple with inadequate public infrastructure, limited access to quality healthcare, educational deficiencies, unemployment and rising costs of essential goods and services.
For businesses, inadequate roads, unreliable water supply, poor healthcare infrastructure and weaknesses in the education system increase operating costs and constrain productivity.
Small and medium-sized enterprises, which depend heavily on public infrastructure and an efficient business environment, are particularly vulnerable to these deficiencies.
Consequently, the inability of state governments to execute approved budgets efficiently has implications beyond public sector financial management. It also affects private sector competitiveness, investment decisions, job creation and the broader economic development of their respective states.
There is also a need to examine the relationship between increased FAAC allocations and internally generated revenue.
While higher federal transfers have strengthened the fiscal position of many states, sustainable public finance requires governments to develop stronger domestic revenue systems rather than rely excessively on allocations from the Federation Account.
States must improve tax administration, expand their economic base, reduce revenue leakages and create an environment that encourages legitimate business activities.
However, revenue mobilisation must be balanced with economic realities. Aggressive taxation that places additional burdens on struggling businesses and households could undermine economic activity and weaken the revenue base over time.
The more sustainable approach is to expand economic opportunities, improve compliance, strengthen collection systems and ensure that taxpayers can identify tangible benefits from the taxes and levies they pay.
At the same time, the increase in federal allocations should provide state governments with an opportunity to address existing infrastructure and social development gaps without accumulating unsustainable debt.
The N26.62 trillion in unspent budgetary provisions identified by BudgIT should therefore prompt a detailed examination of the reasons behind the weak expenditure performance.
It is important to establish whether the shortfall resulted from delayed procurement, unrealistic budget assumptions, administrative inefficiencies, poor project preparation, inadequate implementation capacity or delays in releasing funds.
These distinctions matter because the solutions will depend on the specific weaknesses affecting individual state governments.
Where procurement processes are responsible, governments must simplify administrative procedures without compromising transparency and due process.
Where project preparation is inadequate, greater attention should be given to feasibility studies, cost estimates, implementation schedules and the availability of counterpart funding before projects are included in annual budgets.
Where institutional capacity is weak, investments in public sector expertise, financial management systems and project monitoring will be necessary.
Most importantly, state governments must ensure that annual budgets are realistic, properly prioritised and supported by credible implementation plans.
The findings also reinforce the need for citizens to assess elected officials based on measurable development outcomes rather than the size of their budgets or the frequency of announcements about government projects.
The ultimate test of fiscal management is not how much money a government receives or how much it promises to spend, but what the resources achieve for the population.
As Nigeria continues to navigate the consequences of economic reforms, the responsibility of state governments in converting increased revenues into improved living standards has become even more significant.
Higher allocations should translate into better schools, functional hospitals, accessible roads, improved water supply, stronger agricultural value chains and more opportunities for economic participation.
Without these outcomes, the expansion in public revenue risks becoming a statistical improvement with limited practical benefits for ordinary Nigerians.
BudgIT’s latest assessment therefore presents state governments with an important challenge: to demonstrate that the additional resources available to them are being managed responsibly and directed towards priorities that improve citizens’ welfare.
With only 24.4 per cent of the combined approved budgets of the 34 states executed in the first half of 2026, the gap between fiscal capacity and actual development delivery remains a major concern.
The coming months will be critical in determining whether the states can accelerate budget implementation, address administrative bottlenecks and deliver on their spending commitments before the end of the financial year.
Ultimately, Nigeria’s subnational governments must move beyond celebrating increased allocations and ambitious budget figures. The real measure of fiscal progress lies in the roads completed, schools improved, hospitals equipped, water systems restored and economic opportunities created.
For citizens who continue to bear the consequences of inadequate public services, higher government revenues will only become meaningful when they translate into visible and sustainable improvements in their daily lives.
