A new report from the civic-tech group BudgIT shows that in 2023, 32 out of Nigeria’s 36 states got more than half of their money from the federal government. This makes them heavily dependent on these funds, which can be at risk if oil prices drop or if there are changes in federal funding.
The report, launched in Abuja, analyzes how well states manage their finances, comparing what they earn on their own to what they receive from the federal government.
Key findings include:
- 32 states relied on federal allocations for at least 55% of their revenue, and 14 of those depended on it for at least 70%.
- For 34 states, federal money made up more than 62% of their regular income, with 21 states relying on it for at least 80% of their ongoing costs.
- This reliance on federal funds leaves many states vulnerable to economic changes influenced by oil prices.
Despite these risks, the overall revenue for all 36 states increased by 31.2% from 2022 to 2023, reaching N8.66 trillion. This boost was primarily due to a rise in federal allocations after the removal of the petrol subsidy, which allowed for more money to be distributed.
Lagos State was the top contributor, accounting for N1.24 trillion (14.32% of total revenue), while only Lagos and Rivers States generated enough of their own money to cover their operating costs. Other states like Akwa Ibom and Bayelsa needed over five times their own revenue to meet expenses, indicating a heavy reliance on federal aid.
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The total spending of all states was N9.78 trillion in 2023, up 21.19% from the previous year. Again, Lagos led in spending, accounting for over N1.49 trillion (15.23% of the total). Much of the increase in spending was due to rising salaries and investments.
Although all states managed to raise enough income to cover their regular expenses without borrowing, the total state debt increased by 38.1%, reaching N10.01 trillion by the end of 2023.
BudgIT is encouraging state governments to find better ways to increase their own revenue, reduce their reliance on federal funds, and manage their debts more effectively. The report suggests that states need to come up with innovative strategies to manage their resources and ensure financial stability in the face of potential economic challenges.
At the report launch, BudgIT’s Country Director, Gabriel Okeowo, emphasized the importance of analyzing how states utilize their resources as revenue increases. He also noted that this year’s report examines the investments states are making in healthcare, revealing that while they allocated N2.3 trillion for health in 2023, they spent only 58.16% of that amount.
