World Bank: Only Lagos, Enugu Generate Enough Revenue to Cover Recurrent Costs

According to the World Bank's October 2026 Nigeria Development Update, only Lagos and Enugu states generated sufficient internally generated revenue (IGR) to cover their recurrent expenditure in 2025, highlighting the ongoing reliance of most state governments on federal funding for day-to-day operations. While states experienced significant improvements in revenue collection, their IGRs typically covered only around 40% of recurrent spending between 2021 and 2023, rising to approximately 50% by 2024 and 2025.

However, Lagos and Enugu were the sole exceptions, with Lagos generating revenue equivalent to 160% of its recurrent spending and Enugu surpassing it by a substantial margin at 377%. The World Bank cautioned that the inability of most states to finance their recurrent expenditure through IGRs posed a significant fiscal risk, particularly in the event of a decline in federally collected revenues.

The report also noted that tax administration improvements and digital technology initiatives in revenue administration contributed to a larger resource pool for state governments. In real terms, aggregate state IGRs grew by 55% between 2023 and 2025, with Enugu leading the way, experiencing a remarkable 732% increase in IGR, rising from N25 billion to N209 billion.

The report attributed this growth to Lagos' aggressive expansion of its tax net, capturing thousands of previously unregistered self-employed individuals, contractors, and landlords into the formal tax structure, and implementing deep systemic and digital technology reforms, including automating revenue collection and enforcing cashless payments.