According to the World Bank's latest Nigeria Development Update, state government revenues in Nigeria experienced a remarkable 93% increase in real terms from 2023 to 2025. This surge in revenue was primarily fueled by improved federation revenues, foreign exchange reforms, and the removal of the petrol subsidy, which collectively expanded the fiscal space for state governments. Consequently, expenditures also rose by 92%, with a notable shift in focus towards capital projects, particularly in transport, housing, and agriculture.
This increase in state revenues is significant as it reflects a broader trend of fiscal improvement in Nigeria, which has historically struggled with budget deficits and underinvestment in infrastructure. The World Bank highlighted that the share of capital spending in total expenditures rose from 46% to 61%, indicating a strategic pivot towards economic infrastructure. However, the decline in education spending from 14.9% to 12.1% raises questions about the balance between immediate infrastructure needs and long-term social services, which are crucial for sustainable development.
Looking ahead, the challenge for Nigerian states will be to ensure that the increased revenues translate into tangible improvements in public services and infrastructure. The World Bank has urged state governments to enhance spending efficiency and accountability to maximize the benefits of this fiscal windfall. As Nigeria's economy shows signs of growth, with a projected average GDP increase of 4.4% between 2026 and 2028, the effectiveness of these reforms will be critical in shaping the country's economic landscape and influencing investor confidence in both local and international markets.