Lagos State has emerged as Nigeria’s best-performing state in fiscal management, while Enugu recorded a remarkable 125.91 per cent growth in internally generated revenue (IGR), according to the 2026 State of States Report released by civic-tech organisation BudgIT.
The report, launched on Tuesday, November 3, in Lagos, assessed the 2025 fiscal performance of 35 states, examining their capacity to generate revenue, manage expenditure, sustain debt obligations and direct public spending towards critical development sectors.
Rivers State was excluded because it had not published the audited financial statements and budget implementation reports required for the assessment. BudgIT said the absence of the data, following the declaration of a state of emergency in 2025, made the state’s fiscal performance inaccessible for analysis.
Lagos secured the top position nationally, supported by its diversified revenue base and IGR of N1.71 trillion, representing a 35.67 per cent increase from N1.26 trillion in 2024.
Enugu was among the standout performers, recording a 125.91 per cent increase in IGR, from N180.5 billion to N407.76 billion. The state ranked second nationally in revenue mobilisation, although BudgIT cautioned that the composition of its revenue growth raised questions about its long-term sustainability.
Oyo and Gombe also recorded significant IGR increases of 112.79 per cent and 111.28 per cent respectively, while Abia posted 64.48 per cent growth and Akwa Ibom recorded a 45.11 per cent increase.
Kebbi emerged as another notable performer, ranking fifth nationally after its total revenue increased by 59.54 per cent to N228 billion.
Despite the improvements, the report warned that rising revenue does not automatically translate into better public services, arguing that the quality and impact of government spending must be central to assessing fiscal performance.
Yobe, Ekiti, Sokoto and Osun face fiscal pressures
The ranking exposed significant differences in the financial health of states, with several governments struggling with weak domestic revenue, rising expenditure commitments and debt-related vulnerabilities.
Yobe ranked 25th, Ekiti 26th, Sokoto 27th, Kaduna 29th, Adamawa 30th and Osun 32nd. BudgIT identified weak revenue mobilisation, expenditure pressures and debt sustainability concerns among the challenges confronting states towards the lower end of the ranking.
Yobe generated only N13.35 billion in IGR in 2025, while Ebonyi recorded N21.9 billion, highlighting the limited capacity of some states to finance their expenditure obligations from internally generated resources.
The report also raised concerns about Sokoto’s weak revenue mobilisation and spending on critical development sectors, as well as Kaduna’s rising debt burden.
Zamfara, which ranked 19th, recorded improvements in IGR and substantial capital expenditure, but declining aggregate revenue and increased foreign debt exposure weakened its overall fiscal position. Ondo and Oyo ranked 21st and 22nd respectively.
Lagos generates N1.71tn as states remain dependent on FAAC
BudgIT identified continued dependence on allocations from the Federation Account Allocation Committee (FAAC) as a major weakness in the fiscal structure of many states.
While Lagos recorded total revenue of N2.68 trillion, with internally generated funds making a significant contribution, several states remained heavily reliant on federal transfers to finance their recurrent obligations.
FAAC transfers accounted for approximately 90 per cent of Akwa Ibom’s recurrent revenue, 86.47 per cent in Anambra and 82.90 per cent in Abia. In Kano, statutory transfers represented 79.28 per cent of recurrent revenue.
The figures, according to the report, demonstrate that many states have yet to develop sufficiently strong domestic revenue systems to reduce their vulnerability to fluctuations in federal allocations.
Enugu’s impressive IGR growth also came with an important qualification. Non-tax receipts accounted for 90.79 per cent of the absolute increase in the state’s internally generated revenue, raising questions about the sustainability and institutional foundations of its revenue expansion.
Rising expenditure raises concerns over fiscal discipline
The report found that government spending increased substantially in several states, but warned that expanding expenditure without corresponding improvements in revenue and service delivery could undermine fiscal sustainability.
Lagos recorded total expenditure of N3.16 trillion, representing a 33.24 per cent increase, while Oyo’s expenditure rose by 118.71 per cent to N978.64 billion.
Enugu’s expenditure increased by 84.80 per cent to N880.57 billion, while Abia recorded a 44.37 per cent increase to N458.95 billion.
Operating expenses also placed pressure on state finances. Lagos spent N1.29 trillion on operating expenses, an increase of 23.89 per cent, while Oyo’s operating costs rose by 88.85 per cent to N372.68 billion.
In Abia, operating expenses nearly doubled, rising from N64.19 billion to N126.68 billion. The increase was partly driven by a 197.07 per cent rise in overhead expenditure to N70.87 billion.
Consequently, the state’s IGR covered only 53.56 per cent of its operating expenses in 2025, compared with 64.28 per cent in the previous year.
BudgIT warned that rising administrative and operational costs could consume additional revenue that should otherwise support infrastructure and essential public services.
Capital spending rises, but development impact remains uncertain
Several states recorded substantial increases in capital expenditure during the period under review.
Lagos increased capital spending by 46.69 per cent to N1.58 trillion, while Enugu more than doubled its capital outlay to N693.88 billion.
Akwa Ibom’s capital expenditure rose by approximately 85 per cent to N970.83 billion, while Abia and Anambra recorded N319.91 billion and N290.74 billion respectively.
Oyo’s capital expenditure also more than doubled to N423 billion.
However, BudgIT cautioned that higher capital expenditure should not automatically be interpreted as evidence of improved development outcomes.
The organisation said the quality of spending, the projects selected, their implementation and their relevance to citizens’ needs were more important measures of the value governments derived from public resources.
Osun, Ebonyi face debt servicing and liability concerns
The report also highlighted significant differences in the debt positions of state governments, warning that foreign-currency exposure, accumulated arrears and debt servicing obligations could restrict future spending.
Lagos recorded a total debt stock of approximately N2.90 trillion at the end of 2025, while Ogun’s debt reached N538.92 billion, making it the fourth most indebted state in the assessment.
Enugu’s total debt increased by 18.98 per cent to N300.95 billion, alongside a fiscal deficit of N110.95 billion.
In contrast, Abia and Anambra reduced their total debt stocks by 8.86 per cent and 15.49 per cent respectively.
Foreign-currency exposure remained a concern in several states. It accounted for 76.06 per cent of Abia’s debt, 92.73 per cent of Anambra’s and 93.48 per cent of Ondo’s total debt, leaving their finances vulnerable to exchange-rate movements.
Osun spent N100.17 billion on debt servicing, equivalent to 28.60 per cent of its total revenue. Ebonyi spent N42.51 billion, representing 15.99 per cent of its revenue.
Ebonyi’s debt servicing obligations were almost twice its IGR of N21.9 billion. The state also reported N43.32 billion in contractor arrears.
Abia recorded combined pension, gratuity and contractor arrears of N41.16 billion, while Kwara had N15.96 billion in contractor arrears and N23.87 billion in pension and gratuity arrears.
BudgIT warned that such outstanding obligations represent claims on future government revenues and reduce the resources available for new development projects.
BudgIT changes assessment methodology
The 2026 edition introduces a revised methodology designed to assess not just how much money states generate and spend, but how effectively they manage public resources and translate expenditure into development.
The new framework evaluates states across four pillars. Revenue performance accounts for 40 per cent of the overall score, fiscal viability 30 per cent, debt sustainability 15 per cent and spending in selected critical sectors the remaining 15 per cent.
The assessment of critical-sector expenditure focuses on agriculture, health, education, and water, sanitation and hygiene (WASH). It considers capital spending, actual expenditure and the implementation performance of budgeted projects.
The approach represents a shift from an assessment framework that placed greater emphasis on revenue growth and the relative prioritisation of capital expenditure towards one that gives more attention to spending quality and developmental impact.
Commenting on the findings, BudgIT’s Head of Research and Policy Advisory, Engr. Adejoke Akinbode, said increased public revenue offered states an opportunity to accelerate development but should not be treated as the ultimate measure of fiscal performance.
“The expansion in public revenue presents an important opportunity for Nigerian states to accelerate development, but the real measure of fiscal performance must go beyond how much money governments receive or spend,” Akinbode said.
She noted that important questions remained about expenditure priorities, budget execution, debt management and the quality of investments in critical sectors despite the larger revenue envelopes available to state governments.
“The ultimate test of fiscal responsibility is whether public resources are translated into better healthcare, improved education, productive infrastructure and other essential services that directly improve citizens’ lives,” she said.
Akinbode urged states to move beyond celebrating revenue growth and demonstrate measurable developmental returns on public expenditure.
BudgIT also called on state governments to strengthen domestic revenue institutions, adopt conservative revenue projections, improve budget credibility and prioritise development programmes with measurable public benefits.
The organisation warned against expanding administrative spending at the expense of productive investments, stressing that borrowing should be directed towards projects capable of generating sustainable economic and social returns.
The central message of the 2026 report is that improved allocations and rising revenue are not sufficient indicators of good governance. For Nigerian states, the real test is whether public money is converted into better living conditions, stronger infrastructure and improved access to essential services.
