Nigeria’s 36 states have recorded a significant increase in revenue over the past two years, but the additional funds have not translated into a larger share of spending on education, according to a new World Bank report.
The bank disclosed that state governments recorded a 93 per cent increase in aggregate revenue between 2023 and 2025, while education’s share of total expenditure fell from 14.9 per cent in 2021 to 12.1 per cent in 2025.
The findings, contained in the latest Nigeria Development Update, raise questions about how state governments are allocating public funds amid changes in the country’s economic and fiscal environment.
The report examined the relationship between rising government revenue and spending priorities across Nigeria’s 36 states, highlighting changes in infrastructure investment, healthcare, social protection and other public services.
According to the report, although states significantly expanded their financial resources, ensuring that the additional revenue improves living standards will require more efficient spending, stronger accountability and better delivery of essential services.
Nigeria’s States Record Major Revenue Growth
The World Bank reported that the combined revenue of Nigeria’s 36 states increased by approximately 93 per cent in real terms between 2023 and 2025.
State expenditure also rose substantially, increasing by 92 per cent over the same period.
The figures indicate that state governments experienced a considerable expansion in their financial resources and spending capacity during the period under review.
The report, made available to the News Agency of Nigeria (NAN) by the World Bank in Washington, D.C., attributed the revenue growth to several economic and fiscal developments.
These included exchange-rate reforms, the removal of the petrol subsidy, improvements in revenue administration and higher allocations from the Federation Account.
States also benefited from refunds, the settlement of longstanding federal obligations, intervention funds and stronger collections from Value Added Tax (VAT).
Together, these factors contributed to the increase in resources available to state governments.
However, the World Bank’s findings suggest that the growth in revenue is only part of the broader picture. How governments distribute their spending across different sectors remains equally important in determining whether additional public funds lead to better outcomes for citizens.
Education Receives a Smaller Share of State Spending
Despite the substantial increase in revenue, education accounted for a smaller proportion of total state expenditure in 2025 than it did in 2021.
According to the report, education’s share of state spending declined from 14.9 per cent in 2021 to 12.1 per cent in 2025.
The figures point to a reduction in the proportion of state budgets allocated to education over the period examined.
This development is particularly significant because education is central to human capital development, workforce productivity and the long-term economic prospects of Nigeria’s population.
Public investment in education helps support the provision of learning facilities, teaching resources and other services needed to improve educational outcomes.
When education receives a declining share of public expenditure, the implications depend partly on the actual amount spent, the cost of delivering services and the effectiveness of budget implementation. A lower spending share does not necessarily mean that the total amount allocated to education has fallen.
Nevertheless, the World Bank’s findings highlight the importance of examining whether rising government revenue is being matched by sufficient investment in sectors that directly affect people’s opportunities and quality of life.
The report stressed that stronger investment in human capital would be necessary to ensure that Nigeria’s economic reforms generate sustainable employment and improve living standards.
Health Spending Remains Stable as Social Protection Expands
While education’s share of state expenditure declined, spending on health remained broadly stable at approximately seven per cent.
The report also identified an increase in the proportion of expenditure devoted to social protection.
According to the World Bank, social protection’s share of state spending rose from 1.4 per cent to 4.4 per cent between the periods compared in the report.
The increase suggests that social protection has become a more prominent component of state expenditure, even as education’s share has declined.
Social protection programmes can support vulnerable households and help people cope with economic difficulties. Their effectiveness, however, depends on how resources are targeted, implemented and monitored.
The contrasting trends across education, health and social protection illustrate how states have adjusted their spending priorities amid changing fiscal conditions.
For policymakers, the challenge is to ensure that these decisions address immediate social needs without undermining longer-term investments in education, healthcare and workforce development.
The World Bank’s broader message is that increased revenue must be accompanied by spending decisions that produce measurable improvements in citizens’ welfare.
Capital Expenditure Takes a Larger Share of State Budgets
One of the most notable changes identified in the report was the increase in capital expenditure across Nigeria’s states.
Capital spending accounted for 61 per cent of total state expenditure, compared with 46 per cent previously.
This represents a substantial shift towards investment spending, which can include infrastructure projects and other assets intended to support economic activity and public service delivery.
Transport infrastructure recorded the largest increase, while spending on housing, agriculture and other economic investments also rose significantly.
Investment in transport infrastructure can help improve connectivity, facilitate the movement of goods and people, and support commercial activities. Similarly, housing and agricultural investments can contribute to economic development when projects are appropriately planned and implemented.
However, the benefits of higher capital expenditure depend on the quality of projects, the efficiency of procurement processes and the extent to which completed investments meet public needs.
An increase in capital spending alone does not guarantee improved living conditions. Governments must also ensure that projects are completed, maintained and delivered at reasonable cost.
The report’s findings therefore point to the importance of balancing infrastructure development with adequate funding for essential services, including education and healthcare.
World Bank Calls for Better Public Spending and Accountability
Matthew Verghis, the World Bank’s Country Director for Nigeria, said the increase in government revenue created an opportunity for states to address important development needs.
He identified infrastructure, education, healthcare and water services as areas where additional public resources could make a meaningful difference.
However, he emphasised that governments needed to improve spending efficiency, strengthen accountability and deliver services more effectively to ensure that the benefits of higher revenue reached ordinary Nigerians.
The message reflects a central issue in public finance: raising more revenue does not automatically produce better development outcomes.
The impact of government spending depends on whether resources are directed towards pressing priorities and whether public institutions can convert budget allocations into functioning services.
For state governments, this means improving the planning, execution and monitoring of public expenditure while ensuring that available funds respond to the needs of their populations.
It also highlights the importance of transparency in public financial management, allowing citizens to assess how government resources are being used and what results they produce.
The World Bank acknowledged that Nigerian states had made progress in fiscal reporting, transparency and internally generated revenue.
These improvements can support stronger financial management and help governments better understand their revenue sources and expenditure commitments.
Nevertheless, the bank stressed that continued progress would require greater attention to human capital investment and the quality of public services.
Economic Growth Could Average 4.4% Between 2026 and 2028
Looking ahead, the World Bank projected that Nigeria’s economy could grow by an average of 4.4 per cent between 2026 and 2028.
The projection is conditional on the continuation of reforms and improvements in service delivery.
While economic growth can create opportunities for employment and higher incomes, its broader benefits depend partly on whether people can access quality education, healthcare, infrastructure and other essential services.
The bank’s assessment therefore links the country’s economic outlook with the need for effective public spending at both federal and state levels.
For Nigeria’s states, the increase in revenue provides an opportunity to strengthen infrastructure, expand essential services and invest in the skills and capabilities of their populations.
Achieving these objectives will require careful budgeting, transparent financial management and consistent implementation of development programmes.
The World Bank urged federal and state authorities to ensure that higher public revenue translates into tangible improvements in Nigerians’ welfare.
What the World Bank Findings Mean for Nigerians
The report presents a mixed picture of Nigeria’s public finances. State governments have recorded substantial revenue growth, increased expenditure and expanded capital investment, while education’s share of total spending has declined and health spending has remained broadly stable.
Social protection, meanwhile, has taken a larger share of state expenditure.
These changes highlight the importance of looking beyond revenue figures when assessing the impact of economic reforms. The real test is whether additional public resources improve access to essential services, create economic opportunities and strengthen household financial security.
For millions of Nigerians, the benefits of stronger state finances will ultimately be felt through the quality of schools, healthcare facilities, roads, water services and other public infrastructure available in their communities.
As the country pursues further economic reforms, the World Bank’s findings underscore the need for state and federal governments to align their spending priorities with long-term development goals.
The projected average economic growth of 4.4 per cent between 2026 and 2028 offers a potential foundation for progress, provided reforms remain on track and public resources are used effectively.
Ultimately, higher revenue is an opportunity rather than a guarantee of better living standards. Turning that opportunity into lasting progress will depend on how governments allocate public funds, account for their spending and deliver services that improve the lives of Nigerians.
