The rising cost of living, worsened by President Bola Tinubu’s removal of petrol subsidies and the floating of the naira in 2023, adds to the woes of Mr Abdul and countless others across Nigeria.

This is despite PREMIUM TIMES’ calculation showing N26.63 trillion in combined budgets across the 36 states for 2025, to say nothing of the federal government’s N54.99 trillion spending plan for the year.

The 36 states’ budgets— meant to serve grassroots needs better— leapt to N26.63 trillion from N16.15 trillion in 2024, according to ICIR, reflecting a 64 per cent surge in planned spending amid a rapidly shifting economic landscape.

PREMIUM TIMES’ analysis of the states’ N26.63 trillion budgets reveals a troubling pattern of soaring allocations, widespread financial dependency, mounting debt burdens, and low investments in education and health.

Over 20 states rely almost entirely on federal allocations to survive. Some are drowning in debt repayments, and others have slashed spending on schools and hospitals to alarming lows. Some have prioritised capital projects, while others spend more on governance than growth.

This investigation dives deep into how the 36 states plan to spend in 2025, what these choices reveal about governance priorities and how these financial choices will impact lives.

Total Budget Ranking: Who’s spending the most? Are bigger budgets delivering results?

Of the 36 states, Lagos leads as the biggest spender with a total budget of N3.37 trillion, boasting a bigger budget than 10 states combined. The state’s budget is 48.5 per cent higher than its N2.27 trillion budget in 2024.

Niger State surprisingly comes second with a total budget of N1.56 trillion. One of Nigeria’s biggest oil-producing states, Rivers, follows with an allocation of N1.19 trillion. Ogun and Delta states come in fourth and fifth places with budgets of N1.05 trillion and N979.2 billion, respectively.

With some states allocating over a trillion naira in their 2025 budgets, the expectation is better services. But do high-budget states actually provide a better quality of life?

A 2024 report by PREMIUM TIMES on the poor state of the Lagos General Hospital, Odan, the oldest government hospital in the state, indicates that Lagos state consistently underfunds healthcare despite being Nigeria’s richest state, as a significant portion of these funds are never released.

For example, in 2021, the Lagos General Hospital received only about N750 million instead of the N900 billion budgeted initially. In 2022, it got just under N800 million from the approved N1.2 billion. In 2023, the hospital received less than N900 million out of the N1.6 billion allocation. By the middle of 2024, the Lagos State Ministry of Health had received only N46 billion, which is less than a third of the N162 billion budgeted for the entire year.

The poor infrastructure observed at the Lagos General Hospital, failure to release full health sector funds, and a shortage of around 30,000 doctors are clear indications that a large budget does not automatically translate to better service for residents.

Niger State’s N1.56 trillion budget for 2025 is concerning, given its low internally generated revenue (IGR).

The budget relies heavily on external funding sources, including capital development funds (N839.72 billion, 53.9 per cent) and FAAC (N397.35 billion, 25.5 per cent). In comparison, IGR accounts for only 14.2 per cent.

This dependence on loans and grants raises concerns about debt sustainability and budget viability.

The state’s budget execution has faced significant challenges in recent years. In 2023, Niger State achieved only 40.8 per cent of its N478 billion budget. In 2024, revenue performance improved slightly to 57.9 per cent of the N365.77 billion target.

Capital project execution was also affected, with only 34 per cent of the N363.48 billion capital budget spent in 2023 and 27.8 per cent of N619.41 billion in 2024, indicating significant delays or abandoned projects.

Meanwhile, Yobe State, with an allocation of N320.8 billion, sits at the bottom of the ranking chart. It is closely followed by Gombe and Ekiti states with budgets of N369.9 billion (N369,902,500,000) and N375.79 billion (N375,790,077,618.15), respectively.

Dependency: Can your state survive without federal allocation?

An analysis of the 36 states’ budgets indicates that the only financially independent state in Nigeria is Lagos, as 73.4 per cent of its revenues are internally generated.

Sadly, most states depend heavily on the federal allocation for more than 69 per cent of their anticipated revenues. This means that they cannot function independently without federal allocations. If the allocation from the federation account takes a drastic cut due to oil price volatility, these states risk financial collapse.

Nigeria operates a revenue sharing system where revenue generated from the previous month is shared among the three tiers of government by the Federation Account Allocation Committee (FAAC) using the sharing formula of 52.68 per cent, 26.72 per cent and 20.60 per cent to the federal, state and local governments, respectively.

After Lagos, Ogun and Rivers states are the next most independent, with IGR shares of 41.8 per cent and 32.1 per cent, respectively. Conversely, the top five dependent states with the highest FAAC reliance and lowest IGRs are Ebonyi—95.3 per cent, Niger—94.7 per cent, Bayelsa—93.5 per cent, Yobe—92.8 per cent, and Borno—92.2 per cent.

Interestingly, Bayelsa’s IGR is among the lowest among the oil-rich states. The state remains highly dependent on federation allocations primarily due to its low IGR, weak private sector, limited industrialisation, and heavy reliance on the 13 per cent derivation fund.

So why do some states struggle to generate revenue and rely heavily on federal allocation? A look into the investment climate and ease of doing business ranking of the states with low IGR and very high FAAC dependency offers a clue.

In its 2023 Subnational Ease of Doing Business (EoDB) report, the Presidential Enabling Business Environment Council (PEBEC) found that Ebonyi, the state with the highest FAAC dependency and lowest IGR in its 2025 budget based on our finding, emerged 32nd while Niger ranked 25th. Bayelsa, Borno and Yobe ranked 24th, 22nd, and 9th, respectively.

PEBEC arrived at its conclusion using six indicators: infrastructure, transparency and accessibility of information, skills and labour, secure and stable environment, regulatory environment, and economic opportunity.

This means states that depend heavily on Abuja fall short of these key business metrics. Improving these areas could translate to a better independent revenue ratio for these states.

Capital vs. Recurrent: Spending priorities

The capital to recurrent expenditure ratio of a state’s budget is a key indicator of the state’s spending preference, as some states spend more on salaries and administrative costs than on actual development projects.

Our analysis shows that 34 out of 36 states prioritise capital spending while only two states, Ekiti and Osun, spend more on salaries and administration than development projects. More than half of their budgets are earmarked for salaries, maintaining government offices, and running costs. For these states, high recurrent spending means fewer resources for actual development.

Meanwhile, the top aspiring spenders on capital projects are Niger, Enugu, and Imo, as over 85 per of their budgets is allocated to infrastructural development. Lagos State allocated 61.5 per cent of its total budget to capital expenditure.

So why did Osun and Ekiti states prioritise salaries and operational costs over development?

Osun State is grappling with a substantial backlog of unpaid salaries and pensions, amounting to N76 billion, which was inherited from the previous administrations. This significant debt has placed a strain on the state’s finances.

Ekiti State faced a similar issue, with N57 billion in unpaid salaries, gratuities, and pension arrears accumulated from past administrations. The current governor, Biodun Oyebanji, says he has initiated efforts to gradually pay off the inherited debts to alleviate the state’s financial burden.

Tosin Popoola, a broadcaster with over a decade of experience covering politics and Ekiti State, told PREMIUM TIMES that the state’s decision to allocate more funds for recurrent expenditure is not unusual.

He explained that while infrastructural development is essential, paying salaries to civil and public servants who form the bulk of the state’s workforce is more crucial.

“In Ekiti, when all of these are happening (regular payment of salary), there will be less tension in the society. So, it’s better than focusing on roads and other infrastructure,” he said.

State of Indebtedness: Which states are drowning in debt?

All 36 states owe some money, but a state’s debt service-to-budget ratio tells how much of its total budget is consumed by debt servicing.

An analysis of each state’s total debt service expenditure against their budgets shows that Cross River, Ebonyi and Bayelsa have the highest Debt-to-Budget Ratio or debt burden.

However, this does not tell the whole story. High debt service might mean a state has a considerable debt. Still, it could also mean it is repaying aggressively. Low debt service does not necessarily imply low debt; it could mean the state is postponing repayment, servicing only interest, or restructuring debt.

To know which states are most dangerously indebted, compared to their economic strength and ability to pay, we must analyse each state’s debt-to-IGR ratio.

Using the state domestic debt stock data as officially reported by the Debt Management Office as of 30 September 2024 and state IGR data compiled by the National Bureau of Statistics (NBS) for the year 2023, we find that states like Taraba (7.49), Imo (7.38), Adamawa (7.19), and Niger (6.69) show dangerously high debt-to-revenue ratios.

These states could take years to pay off their debts, risking economic stability.

In contrast, states such as Jigawa (0.05), Ondo (0.34), Ebonyi (0.62), and Lagos (1.05) maintain much healthier ratios, showing stronger financial positions and better ability to manage debt.

Economic expert Gospel Obele has sounded the alarm on Nigeria’s fiscal situation. He said state governments must implement reforms to tackle these fiscal deficits and systemic issues that have made their states less commercially viable.

“Over 70 per cent of Nigerian states are not viable, to start with. So, when you think of the fact that states have to take care of their debts and their revenue levels are low, it means that it creates room for more vulnerability, and the states will have to keep depending on external factors to keep their viability alive,” he said.

Key Sector Allocations: What do education, health, and infrastructure investments look like?

Most states allocated larger chunks of their capital expenditure to the infrastructure sector rather than to health and education.

States like Adamawa (71.96 per cent) and Borno (60.68 per cent) dedicated significant capital expenditures to roads, housing, and public works. This emphasis on physical development reflects efforts to boost economic growth and, in some cases, rebuild after years of conflict.

Other states with notable infrastructure allocations include Anambra (44.74 per cent), N271.56 billion, Lagos (36.55 per cent), N1.23 trillion, Jigawa (30.18 per cent), N210.78 billion, and Ogun (26.90 per cent), N283.54 billion.

The state with the lowest percentage allocation to infrastructure is Bauchi (0.20 per cent), with only N930 million allocated.

But do states which invest heavily in infrastructure have high education performance and quality healthcare sectors?

While a state’s decision to allocate a large chunk of its capital expenditure for infrastructural development gives hope of rapid growth, it sometimes results in underfunding the health and education sectors.

For instance, Adamawa State allocated over 70 per cent of its capital expenditures for infrastructural development, while its health and education sectors remain among the least developed in Nigeria.

A 2021 report by UNICEF revealed that only 10 per cent of primary school pupils in Adamawa State possessed foundational literacy skills, while 92 per cent could not solve fundamental math problems. The state’s number of out-of-school children is also high. UNESCO pegged the number at 437,000 in 2022.

The state’s health sector is also underfunded and falls short of the Abuja declaration benchmark of 15 per cent. According to the Centre of Social Justice, an analysis of the state’s health sector budget from 2019 to 2021 reveals a significant gap between approved and actual spending.

In 2019, the UNICEF report said, only 29.21 per cent of the approved N21.17 billion health budget was spent, with N6.18 billion utilised. The situation worsened in 2020, when just 21.28 per cent of the allocated N19.39 billion was actually expended. However, in 2021, budget utilisation improved to 53.1 per cent, with N5.85 billion spent out of the approved N11.01 billion.

A closer look at the health sector expenditure patterns shows a consistent prioritisation of recurrent expenses over capital investments.

Meanwhile, education and healthcare remain underfunded in many states despite Nigeria’s high poverty and low literacy rates.

Two states with the lowest allocations for education are Nasarawa (0.44 per cent) and Benue (0.5 per cent). This raises concerns about investments in schools, teachers, and learning facilities.

The state with the highest percentage allocation to education is Oyo State (24.6 per cent), with N168.3 billion allocated. Northern states like Adamawa, Katsina, and Borno have made relatively strong commitments despite their lower IGRs.

Healthcare funding is also low in many states. Anambra (0.51 per cent), Benue (0.57 per cent), and Nasarawa (1.05 per cent) have allocated minimal resources to the health sector, which could impact access to medical services and public health infrastructure.

A government employee in Benue State who did not wish to be named in this interview for fear of retaliation lamented bitterly about the poor state of education and healthcare in the state. He said many schools lack good buildings, classrooms, toilets, and water facilities, and the healthcare sector is in a more dire condition.

“Everything is neglected. I am not sure a pregnant woman in a village would be given good medical attention when she wants to give birth. The medical staff is not enough. The health facilities are not good enough. The health centres are poor,” he said.

He said the state’s low funding for education and healthcare makes him worry about the future of both sectors.

In a state where hospitals are crumbling and schools are under-resourced, the Benue State government allocated less than 1% of its capital budget to health and education. This is an alarming neglect of its most vital social sectors.

Meanwhile, the state with the highest percentage allocation to health is Borno (14.96 per cent), with N92.10 billion allocated.

Thaddeaus Jolayemi, a programmes officer at BudgIT Foundation, warned that inadequate funding for education and healthcare in many Nigerian states could severely hinder development in these critical sectors.

He also highlighted the role of corruption in undermining state budgets, citing the misallocation of funds to non-priority sectors and off-budget diversions that often escape public scrutiny.

“We have observed that many of these funds are redirected to other sectors and may end up off-budget, leading to corruption,” he said.

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He said civil society organisations must continue to push for transparency, conduct social audits, and provide independent oversight to hold governments accountable.

States’ budgets in Nigeria continue to grow in size annually, but the actual impact on citizens’ lives remains limited. This is mainly because many states rely heavily on external factors, such as allocations from the federation account, loans, and grants, which can be unpredictable and unreliable. The state of underdevelopment and disrepair from long years of varying degrees of neglect in many states also makes today’s investments, no matter how huge they appear, look like a drop in the ocean.

Budget implementation is severely hindered when these expected funds fail to materialise, leaving citizens to wonder about the effectiveness of budgetary planning and execution. As a result, the people often do not feel the potential benefits of increased budget sizes. This leads to frustrations and protests as seen during the #EndBadGovernnance protests that rocked Nigeria in August 2024.

*The interviewee’s name was changed based on request for anonymity to avoid retaliation from the authorities.

[Premium Times]