26 states lean on FAAC as wage bills outstrip IGR

26 States Depend on FAAC as Personnel Costs Exceed IGR

At least 26 state governments could not generate enough internally generated revenue to cover their personnel costs in 2025, highlighting their continued dependence on allocations from the Federation Account despite significant improvements in their finances.

An analysis by our correspondents showed that only eight of the 34 states covered by a new BudgIT report generated internally generated revenue higher than their personnel expenditure during the year. The states were Lagos, Enugu, Ogun, Delta, Kaduna, Kwara, Abia and Anambra.

The remaining 26 states generated about N1.16tn internally but spent approximately N1.91tn on personnel, leaving a combined shortfall of about N747bn between their IGR and wage-related expenditure.

The findings are contained in BudgIT’s 2026 report, titled Nigeria’s Economic Reforms: What Has Changed Across States?

The report analysed actual figures from the states’ full-year budget implementation reports for 2022 and 2025. Akwa Ibom and Rivers were excluded because of incomplete or unavailable data.

The figures do not imply that states are expected to finance salaries exclusively from IGR, as statutory allocations are a legitimate source of government revenue. However, they illustrate the extent to which many states would struggle to meet even their personnel obligations without funds distributed by the Federation Account Allocation Committee.

This dependence has persisted despite the sharp increase in revenue available to states following the removal of the petrol subsidy, foreign exchange reforms and higher inflows into the Federation Account.

According to BudgIT, aggregate FAAC allocations rose from N3.43tn in 2022 to N11.38tn in 2025, representing a 232.06 per cent increase and a compound annual growth rate of 50.2 per cent.

IGR also rose substantially, from N1.57tn to N4.15tn during the same period. However, its 165.01 per cent growth and 38.38 per cent CAGR lagged behind the increase in FAAC receipts.

Consequently, states became more dependent on federal transfers even as their internally generated revenue increased. FAAC accounted for 68.7 per cent of aggregate state revenue in 2022 but rose to 73.3 per cent in 2025. Conversely, the share of IGR fell from 31.4 per cent to 26.7 per cent.

BudgIT said the figures showed that “despite improvements in domestic revenue mobilisation, many states remained heavily reliant on transfers from the Federation Account.”

The organisation stressed that improving domestic revenue mobilisation would be critical to strengthening states’ long-term fiscal sustainability and reducing their dependence on federal transfers.

The report stated, “Although statutory allocations accounted for a larger share of the overall increase in revenues, strengthening domestic revenue mobilisation remains essential for improving long-term fiscal sustainability and reducing dependence on federal transfers.”

Yobe generated only N15.42bn in IGR in 2025 but spent N76.34bn on personnel. Its personnel bill was therefore almost five times its IGR, leaving a shortfall of about N60.91bn.

Taraba generated N17.89bn in IGR against personnel expenditure of N55.60bn, meaning its personnel costs were more than three times its internally generated revenue. Sokoto recorded IGR of N20.58bn but spent N58.65bn on personnel, while Adamawa generated N24.14bn internally against a personnel bill of N65.73bn.

Jigawa’s personnel expenditure stood at N92.66bn, compared with IGR of N35.27bn, while Benue spent N73.94bn on personnel after generating N29.38bn internally.

Similarly, Kogi generated N36.50bn in IGR but recorded personnel expenditure of N89.20bn. Kebbi’s IGR of N18.41bn was less than half of its personnel expenditure of N44.82bn.

Other states where personnel costs exceeded IGR were Bauchi, Bayelsa, Borno, Cross River, Ebonyi, Edo, Ekiti, Gombe, Imo, Kano, Katsina, Nasarawa, Niger, Ondo, Osun, Oyo, Plateau and Zamfara.

In absolute terms, Oyo recorded the largest gap among the 26 states. The state generated N102.52bn in IGR but spent N170.04bn on personnel, resulting in a shortfall of about N67.51bn.

Yobe followed with a gap of about N60.91bn, while Jigawa recorded a shortfall of N57.39bn. Ondo’s personnel expenditure of N99.58bn exceeded its IGR of N45.63bn by N53.94