Reported by Simon Daniel Yusuph l Journalist at Weng Global
Nigeria’s state governments recorded a 93 per cent increase in aggregate revenue in real terms between 2023 and 2025, but education’s share of total state expenditure declined from 14.9 per cent in 2021 to 12.1 per cent in 2025, according to the World Bank’s latest Nigeria Development Update released on October 8, 2026.
The report, titled Beyond the Federal Purse: How Higher Revenues Reshaped State Priorities, examines how increased public revenue has influenced spending decisions across Nigeria’s states and the implications for infrastructure, education, healthcare, social protection and economic development.
The findings highlight a significant change in state finances following economic reforms that increased government revenue. Although states expanded their spending on infrastructure and other development priorities, the World Bank found that investment in education and other human-development sectors did not grow as quickly as expenditure on economic infrastructure.
According to the report, aggregate state revenue increased by approximately 93 per cent in real terms between 2023 and 2025, while total expenditure rose by about 92 per cent over the same period.
The figures indicate that state governments had substantially more resources available for public spending. However, the distribution of those resources raises questions about how effectively the additional revenue is being converted into improved public services and living conditions for Nigerians.
The World Bank said the increase in revenue created an opportunity for state governments to strengthen infrastructure, education, healthcare and water services, while stressing that better spending efficiency, accountability and service delivery would be necessary to ensure that citizens benefit from the additional funds.
Education’s Share of State Spending Declines
One of the report’s central findings concerns the declining proportion of state expenditure allocated to education.
The World Bank found that education accounted for 14.9 per cent of total state expenditure in 2021, but its share had fallen to 12.1 per cent by 2025.
This represents a decline of 2.8 percentage points over four years.
The distinction between the share of spending and the actual amount spent is important. The report indicates that expenditure on education increased in real terms during the period, rising from approximately ₦500 billion in 2021 to ₦1.1 trillion in 2025.
However, total state spending expanded more rapidly, reducing education’s proportion of the overall expenditure.
The decline does not, by itself, establish that every state reduced its education budget or that the total amount allocated to schools fell. Rather, it indicates that education received a smaller proportion of the combined resources spent by state governments.
The development raises questions about whether the increase in public revenue is translating into improvements in school infrastructure, teacher availability, learning materials and access to quality education.
State governments play an important role in Nigeria’s education system, particularly in the management and financing of public primary and secondary education. Their budget decisions can influence the condition of school buildings, the availability of teachers, the provision of learning resources and the ability of children to remain in school.
A sustained decline in education’s share of public spending could create challenges if funding fails to keep pace with rising enrolment, population growth and the cost of delivering quality education.
However, assessing the consequences requires more than examining expenditure percentages. Budget implementation, the number of children served, the quality of teaching and the distribution of resources across urban and rural communities are also important indicators.
The World Bank’s findings therefore point to a spending-priority concern rather than proof that educational outcomes have deteriorated in every Nigerian state.
Infrastructure Receives a Larger Share of Public Resources
While education’s share of expenditure declined, state governments increased the proportion of their budgets devoted to capital projects.
The World Bank reported that capital expenditure rose from 46 per cent of total state spending to 61 per cent between 2023 and 2025.
Capital expenditure generally covers investments in long-term assets and infrastructure, including roads, bridges, public buildings and other development projects.
The report identified transport infrastructure as the largest area of increased spending, alongside substantial investments in housing, agriculture and other economic activities.
The shift suggests that state governments have used the additional revenue to expand infrastructure investment while also strengthening their fiscal positions.
Infrastructure can support economic growth by improving transportation, reducing the time and cost involved in moving goods, connecting communities to markets and making it easier for businesses to operate.
For agricultural producers, better roads can improve access to buyers and reduce transportation difficulties. For manufacturers and traders, improved transport networks can help reduce logistical barriers.
Investments in housing and agriculture can also support economic activity when projects are properly planned, completed and maintained.
However, the developmental value of infrastructure spending depends on the quality of projects, their relevance to local needs, procurement practices and the extent to which completed facilities are maintained.
A road project that improves access to markets can deliver economic benefits, but an abandoned or poorly constructed project may fail to provide the intended value.
The same principle applies to public spending more broadly: allocating money to a sector does not automatically guarantee improved services.
The World Bank’s findings suggest that the challenge facing state governments is not simply how to spend more money, but how to ensure that spending decisions produce measurable benefits for residents.
Health Spending Remains Broadly Stable
The report also examined how state governments allocated resources to healthcare.
According to the World Bank, health expenditure increased in real terms between 2021 and 2025, rising from approximately ₦200 billion to ₦700 billion.
Despite this increase in the amount spent, health’s share of total state expenditure remained broadly stable at around seven per cent.
The figures reflect a similar pattern to education: expenditure increased, but the expansion did not match the overall growth in state spending sufficiently to produce a larger share of the total budget.
Healthcare funding is important for maintaining hospitals, primary healthcare centres, medical equipment, essential medicines and health personnel.
State governments also face continuing responsibilities in improving access to healthcare, particularly in communities where residents experience difficulties reaching medical facilities or paying for treatment.
The effectiveness of additional funding depends on how it is allocated and implemented. Investment in medical infrastructure, for example, must be accompanied by adequate staffing, equipment, medicines and reliable operational funding.
A hospital building without sufficient personnel or essential supplies may not deliver the expected improvements in healthcare access.
The World Bank’s findings do not establish that healthcare services worsened during the period. Instead, they highlight the importance of examining how spending growth compares with the broader expansion of state budgets and whether additional resources are producing better outcomes.
Social Protection Receives a Larger Budget Share
Unlike education and health, social protection recorded an increase in its share of state expenditure.
The World Bank reported that social protection’s share rose from 1.4 per cent in 2021 to 4.4 per cent in 2025.
Expenditure on the sector also increased in real terms, rising from less than ₦100 billion to approximately ₦400 billion during the period.
Social protection programmes can include interventions designed to support vulnerable households, low-income residents and people facing economic hardship.
Depending on the programmes implemented by individual states, such interventions may include financial assistance, welfare support and other measures intended to reduce the effects of poverty.
The increased share suggests that social protection received greater relative attention in state budgets than it did in 2021.
However, the overall effect depends on programme design, eligibility criteria, coverage and the effectiveness of delivery systems.
The amount budgeted or spent does not necessarily reveal how many people received support, whether assistance reached the intended beneficiaries or whether the programmes reduced financial hardship.
The World Bank’s findings therefore provide an indication of changing budget priorities, while further state-level information would be needed to assess the impact on vulnerable households.
What Drove the Increase in State Revenues?
The World Bank attributed the improvement in public finances to a combination of economic reforms and changes in revenue collection.
These included foreign-exchange market reforms, the removal of the petrol subsidy and improvements in revenue administration.
The report also identified higher statutory allocations from the Federation Account, refunds and settlements of longstanding federal obligations, dedicated intervention funds and stronger Value Added Tax collections as factors contributing to increased revenue flows to states.
These developments expanded the financial resources available to state governments.
The removal of the petrol subsidy and changes to the foreign-exchange market were major elements of the federal government’s economic reform programme. Their effects have extended to public revenue, prices, business costs and household purchasing power.
The increased resources available to states have created greater opportunities for governments to finance public infrastructure and essential services.
However, additional revenue does not automatically translate into better living conditions. The outcome depends on how governments prioritise expenditure, implement projects and account for the use of public funds.
The World Bank’s report highlights this distinction between having more money available and ensuring that the money delivers meaningful results.
State Governments Still Depend Heavily on Federal Revenue
Despite improvements in their finances, many Nigerian states continue to depend significantly on revenue distributed through the Federation Account.
Federation transfers are an important source of funding for state governments, helping them finance salaries, public services, infrastructure and other responsibilities.
The World Bank’s findings show that the increase in state revenue was influenced not only by states’ own revenue-collection efforts but also by broader changes in public revenue flows.
This distinction matters because states have different levels of economic activity, taxable resources and administrative capacity.
States with larger commercial centres or stronger tax-collection systems may be better positioned to generate substantial internally generated revenue, while others may rely more heavily on federal allocations.
The report also noted improvements in states’ fiscal reporting, transparency and internally generated revenue in recent years.
Increasing internally generated revenue can give state governments greater control over their finances and reduce their vulnerability to fluctuations in federal transfers.
However, effective revenue collection requires transparent administration, efficient systems and fair treatment of taxpayers.
Governments must also consider the ability of residents and businesses to meet their tax obligations, particularly when households face high living costs.
Stronger revenue mobilisation is most beneficial when it supports reliable public services and is accompanied by accountability for how the funds are used.
World Bank Calls for Better Spending Efficiency and Accountability
The World Bank has stressed that higher public revenue must be accompanied by improvements in spending efficiency, accountability and service delivery.
Mathew Verghis, the World Bank’s Country Director for Nigeria, said the increase in state-level revenue created an opportunity to improve infrastructure, education, healthcare and water services.
He also emphasised the importance of ensuring that public resources improve the lives of Nigerians.
The message places the focus on the results of government expenditure rather than revenue growth alone.
For citizens, the practical test of improved public finances is whether schools provide better learning conditions, hospitals deliver more reliable care, roads improve access to markets and communities receive essential services.
Transparency is also important because residents need access to information about public budgets, approved projects, expenditure and implementation progress.
Regular publication of budget performance reports can help citizens, journalists, civil society organisations and legislative bodies examine whether public money is being spent as planned.
Effective oversight can also help identify projects that are delayed, incomplete or failing to deliver their intended benefits.
For state governments, the challenge is to balance investment in infrastructure with spending on human development and essential public services.
Infrastructure and human capital are not competing objectives in every circumstance. Better roads can improve access to schools and hospitals, while a healthier and better-educated population can contribute to productivity and economic growth.
The policy question is how to allocate available resources in ways that support both immediate development needs and long-term improvements in living standards.
Why the Findings Matter for Nigerians
The report is significant because state governments are responsible for delivering many public services that directly affect daily life.
Education, healthcare, local infrastructure and social support influence household welfare and the opportunities available to residents.
When government revenue increases substantially, citizens may reasonably expect improvements in the quality and availability of those services.
The World Bank’s findings show that states have expanded expenditure and increased investment in infrastructure. They also demonstrate that education and health have not gained a larger share of overall spending during the period examined.
This does not mean infrastructure investment is unnecessary or that state governments should abandon capital projects. Nigeria has significant infrastructure needs, and well-planned investments can support economic activity.
However, sustained development also depends on investment in people.
Education can improve skills and employment opportunities, while accessible healthcare can reduce the financial and social consequences of illness. Social protection can help vulnerable households cope with economic difficulties.
For young Nigerians entering the labour market, the relationship between education, skills, infrastructure and job creation is particularly important.
Public spending that improves roads but neglects the development of human capabilities may fail to realise its full economic potential. Similarly, social spending without effective infrastructure can leave communities disconnected from employment and commercial opportunities.
The central challenge is therefore to ensure that increased government revenue supports a balanced development strategy.
Implications for Nigeria’s Economic Outlook
The findings come as Nigeria continues to pursue reforms intended to strengthen economic stability and improve growth.
In its October 2026 update, the World Bank said the economy grew by 4.2 per cent in the first half of 2026, compared with 3.9 per cent and 3.5 per cent in the corresponding periods of 2025 and 2024, respectively.
The bank projected average economic growth of 4.4 per cent between 2026 and 2028, while expecting inflation to decline gradually to approximately 12 per cent by 2028 if reforms are sustained and public service delivery improves.
These projections depend on economic conditions and the implementation of policies that support stability, investment and job creation.
The state revenue findings are relevant because state governments are important participants in public investment and service delivery.
Their decisions can influence the quality of local infrastructure, the development of human capital and the environment in which private businesses operate.
If additional revenue supports productive investment and more effective public services, it could contribute to improved economic opportunities.
If spending is inefficient or projects fail to deliver their intended benefits, the impact of higher revenue on living standards may be more limited.
For this reason, the World Bank’s analysis highlights the need to connect fiscal improvements with measurable development outcomes.
What Happens Next?
The next challenge for state governments is to demonstrate how increased revenue is improving public services and the welfare of residents.
This will require closer attention to budget implementation, the quality of capital projects and the performance of spending on education, health and social protection.
State-level budget data will also be important in determining whether the national pattern identified by the World Bank reflects the experience of individual states or conceals substantial differences between them.
Governments can strengthen accountability by publishing clear expenditure reports, explaining major spending decisions and providing information about the progress and completion of public projects.
Education spending will require particular attention as policymakers consider how to improve school infrastructure, teacher capacity, access to learning materials and educational outcomes.
Healthcare and social protection will also remain important areas for evaluating whether additional public resources are reaching the people who need them.
The World Bank has not suggested that every state should follow an identical spending formula. Rather, its findings underline the need for efficient spending, accountability and improved service delivery.
For citizens, the key question is whether the significant increase in state revenue will translate into tangible improvements in everyday life.
The figures show that Nigerian states have gained considerably more financial resources. The next measure of progress will be how effectively those resources are used to improve education, healthcare, infrastructure and economic opportunities across the country.
Weng Global – stories beyond borders
Sources
- World Bank — From Higher Revenues to Better Lives: Strengthening State Spending for Growth, Jobs, and Services, October 8, 2026.
- World Bank — Beyond the Federal Purse: How Higher Revenues Reshaped State Priorities, Nigeria Development Update, October 2026.
- Reuters — Reporting on Nigeria’s economic outlook and the World Bank’s October 2026 development update.
- BusinessDay — Reporting on state revenue growth and government spending priorities.
- ThisDay — Reporting on the World Bank’s recommendations for state spending, human capital and public services.
