Lagos State has emerged as Nigeria’s best-performing state in fiscal management in 2026, while Enugu recorded a remarkable 125.91 per cent growth in Internally Generated Revenue (IGR), according to the 11th edition of BudgIT’s State of States Report.
The report, themed “From Allocation to Impact: Rethinking State Spending Priorities,” assessed the 2025 fiscal performance of 35 states, examining their revenue generation capacity, expenditure efficiency, fiscal sustainability, debt management and investment in critical development sectors.
Rivers State was excluded from the assessment for the second consecutive year due to the non-availability of its audited financial statements and budget implementation reports.
BudgIT, a civic-tech organisation focused on fiscal transparency and accountability, said the 2026 edition introduced a revised assessment methodology that places greater emphasis on the quality of government spending and its impact on citizens rather than relying solely on revenue growth and expenditure levels.
Under the new framework, states were assessed across four major indicators: revenue performance, which accounts for 40 per cent; fiscal viability, 30 per cent; debt sustainability, 15 per cent; and spending on critical sectors, including agriculture, health, education and water, sanitation and hygiene (WASH), which accounts for the remaining 15 per cent.
Lagos secured the first position nationally, supported by its diversified revenue base and IGR of N1.71 trillion, representing a 35.67 per cent increase from N1.26 trillion recorded in 2024.
Kebbi State emerged fifth in the ranking after recording a 59.54 per cent increase in total revenue to N228 billion.
However, the report identified significant fiscal challenges in several states, with Yobe ranking 25th, Ekiti 26th, Sokoto 27th, Kaduna 29th, Adamawa 30th and Osun 32nd.
It noted that weak domestic revenue mobilisation, rising expenditure obligations and debt-related vulnerabilities continued to undermine the fiscal positions of several states.
Zamfara, which ranked 19th, recorded improvements in IGR and capital expenditure, but declining aggregate revenue and increasing foreign debt exposure weakened its overall fiscal position. Ondo and Oyo ranked 21st and 22nd, respectively.
On revenue generation, Enugu recorded one of the strongest performances, with IGR rising by 125.91 per cent from N180.5 billion in 2024 to N407.76 billion in 2025, placing it second nationally.
Oyo and Gombe also recorded significant IGR growth of 112.79 per cent and 111.28 per cent, respectively, while Abia posted a 64.48 per cent increase and Akwa Ibom 45.11 per cent.
Kano, the leading IGR-generating state in the North-West, generated N102.6 billion, representing a 35.78 per cent increase.
Despite the impressive figures, BudgIT cautioned that revenue growth alone does not necessarily indicate stronger fiscal performance.
It observed that non-tax receipts accounted for 90.79 per cent of the absolute increase in Enugu’s IGR, raising questions about the sustainability of its revenue expansion.
The report also highlighted the continued dependence of many states on allocations from the Federation Account Allocation Committee (FAAC).
While Lagos generated total revenue of N2.68 trillion, with significant contributions from its own revenue sources, FAAC transfers accounted for approximately 90 per cent of Akwa Ibom’s recurrent revenue, 86.47 per cent in Anambra and 82.90 per cent in Abia.
In Kano, statutory transfers accounted for 79.28 per cent of recurrent revenue, underscoring the limited fiscal independence of many states.
On expenditure, Lagos recorded a 33.24 per cent increase in total spending to N3.16 trillion, while Oyo’s expenditure rose by 118.71 per cent to N978.64 billion.
Enugu recorded an 84.80 per cent increase to N880.57 billion, while Abia’s expenditure grew by 44.37 per cent to N458.95 billion.
BudgIT, however, warned that expenditure growth in some states outpaced revenue expansion, raising concerns about fiscal discipline and the sustainability of government operations.
The report also identified rising operating expenses as a major source of pressure on state finances.
Lagos recorded operating expenses of N1.29 trillion, representing a 23.89 per cent increase, while Oyo’s operating expenses rose by 88.85 per cent to N372.68 billion.
In Abia, operating expenses nearly doubled from N64.19 billion to N126.68 billion, driven partly by a 197.07 per cent increase in overhead expenditure to N70.87 billion.
Consequently, the state’s IGR covered only 53.56 per cent of its operating expenses in 2025, compared with 64.28 per cent in 2024.
On capital expenditure, Lagos increased spending by 46.69 per cent to N1.58 trillion, while Enugu more than doubled its capital outlays to N693.88 billion.
Akwa Ibom’s capital expenditure rose by approximately 85 per cent to N970.83 billion, while Abia and Anambra recorded N319.91 billion and N290.74 billion, respectively.
Oyo also more than doubled its capital expenditure to N423 billion.
However, BudgIT stressed that higher capital spending does not automatically translate into improved development outcomes, noting that the quality, execution and relevance of projects to citizens’ needs remain critical.
On debt sustainability, Lagos recorded a total debt stock of approximately N2.90 trillion at the end of 2025, while Ogun’s debt rose to N538.92 billion, making it the fourth most indebted state in the assessment.
Enugu’s total debt increased by 18.98 per cent to N300.95 billion, alongside a widening fiscal deficit of N110.95 billion.
In contrast, Abia and Anambra reduced their total debt stocks by 8.86 per cent and 15.49 per cent, respectively.
The report, however, raised concerns about foreign currency exposure, which accounted for 76.06 per cent of Abia’s debt, 92.73 per cent of Anambra’s and 93.48 per cent of Ondo’s total debt.
It also highlighted the burden of debt servicing and accumulated liabilities, noting that Osun spent N100.17 billion on debt servicing, representing 28.60 per cent of its total revenue.
Ebonyi spent N42.51 billion on debt servicing, equivalent to 15.99 per cent of its revenue, with the amount almost twice its IGR of N21.9 billion.
The state also reported N43.32 billion in contractor arrears.
Similarly, Abia recorded combined pension, gratuity and contractor arrears of N41.16 billion, while Kwara had N15.96 billion in contractor arrears and N23.87 billion in pension and gratuity obligations.
Commenting on the findings, BudgIT’s Head of Research and Policy Advisory, Engr. Adejoke Akinbode, said increased public revenue presented an opportunity for states to accelerate development but stressed that fiscal performance should be measured by the impact of public spending.
“The real measure of fiscal performance must go beyond how much money governments receive or spend,” she said.
Akinbode noted that despite expanding revenue envelopes, questions remained about expenditure priorities, budget execution, debt management and the quality of investments in critical sectors.
She stressed that public resources should translate into improved healthcare, better education, productive infrastructure and other essential services that directly improve citizens’ lives.
BudgIT urged state governments to strengthen domestic revenue institutions, adopt conservative revenue forecasts, improve budget credibility and prioritise high-impact development programmes.
It also advised governments to ensure that borrowing is directed towards investments capable of generating sustainable economic and social returns.
The organisation maintained that the focus of fiscal governance should shift from the volume of allocations and government spending to measurable development outcomes, insisting that citizens must see tangible improvements in their living conditions from public resources.
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