Lagos State has emerged as Nigeria’s best-performing state in the 2026 fiscal performance ranking, while Enugu recorded a 125.91 per cent increase in internally generated revenue (IGR) in 2025, according to the latest State of States Report released by BudgIT.
The report, which assessed the 2025 fiscal performance of 35 states, ranked Lagos first nationally, citing its diversified revenue base and IGR of N1.71tn, representing a 35.67 per cent increase from the N1.26tn generated in 2024.
Enugu emerged as one of the strongest performers in revenue mobilisation, recording an increase in IGR from N180.5bn in 2024 to N407.76bn in 2025, representing a growth of 125.91 per cent.
The state ranked second in IGR growth, while Oyo and Gombe also recorded significant increases of 112.79 per cent and 111.28 per cent, respectively.
However, the report cautioned that higher revenue generation does not necessarily translate into improved public service delivery, stressing the need for state governments to prioritise expenditure efficiency, debt management and investments in critical development sectors.
BudgIT made the findings public in the 11th edition of its flagship State of States Report, themed “From Allocation to Impact: Rethinking State Spending Priorities”.
The report introduced a revised assessment framework that places greater emphasis on the quality and developmental impact of public expenditure rather than relying mainly on revenue growth and spending volumes.
Under the revised methodology, states were assessed across four pillars: revenue performance, accounting for 40 per cent; fiscal viability, 30 per cent; debt sustainability, 15 per cent; and spending on selected critical sectors, including agriculture, health, education, and water, sanitation and hygiene (WASH), accounting for the remaining 15 per cent.
The assessment examined states’ capacity to generate revenue internally, finance operating expenses, meet debt obligations and direct public resources towards development priorities.
Beyond Lagos and Enugu, Kebbi emerged as another notable performer, ranking fifth nationally after recording a 59.54 per cent increase in total revenue to N228bn.
However, several states continued to face significant fiscal challenges. Yobe ranked 25th, Ekiti 26th, Sokoto 27th, Kaduna 29th, Adamawa 30th and Osun 32nd in the overall assessment.
BudgIT attributed the weak performances to varying combinations of poor domestic revenue mobilisation, rising expenditure obligations and debt-related vulnerabilities.
The report specifically identified Kaduna’s increasing debt burden and Sokoto’s weak revenue mobilisation and low spending on critical development sectors as areas of concern.
On revenue generation, Lagos maintained its position as the country’s leading state, with its N1.71tn IGR reflecting the advantage of a diversified economic and revenue base.
Enugu’s performance was particularly significant, although BudgIT raised questions about the sustainability of its revenue expansion, noting that non-tax receipts accounted for 90.79 per cent of the absolute increase in IGR.
Oyo and Gombe also recorded substantial improvements, with their internally generated revenue increasing by 112.79 per cent and 111.28 per cent, respectively.
Abia recorded a 64.48 per cent increase, while Akwa Ibom’s IGR grew by 45.11 per cent. Kano, the highest IGR-generating state in the North-West, generated N102.6bn, representing a 35.78 per cent increase.
Despite the improvements, the report noted that many states remained heavily dependent on allocations from the Federation Account Allocation Committee (FAAC), exposing their finances to fluctuations in federally distributed revenue.
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 represented 79.28 per cent of recurrent revenue, highlighting the limited capacity of several states to finance their operations through internally generated resources.
On expenditure, Lagos recorded a 33.24 per cent increase in total spending to N3.16tn, while Oyo’s expenditure rose by 118.71 per cent to N978.64bn.
Enugu recorded an 84.80 per cent increase in expenditure to N880.57bn, while Abia’s spending increased by 44.37 per cent to N458.95bn.
BudgIT, however, warned that the rapid expansion in government expenditure in some states was outpacing revenue growth, potentially undermining fiscal discipline and the ability of governments to meet their financial obligations.
The report also highlighted the increasing burden of operating expenses on state finances, noting that rising administrative costs could limit the resources available for infrastructure and other development projects.
Lagos recorded operating expenses of N1.29tn, representing an increase of 23.89 per cent, while Oyo’s operating expenses rose by 88.85 per cent to N372.68bn.
In Abia, operating expenses almost doubled from N64.19bn to N126.68bn, driven partly by a 197.07 per cent increase in overhead expenditure to N70.87bn.
Consequently, the state’s IGR covered only 53.56 per cent of its operating expenses in 2025, compared with 64.28 per cent in the previous year.
On capital expenditure, Lagos increased spending by 46.69 per cent to N1.58tn, while Enugu more than doubled its capital outlay to N693.88bn.
Akwa Ibom’s capital expenditure rose by approximately 85 per cent to N970.83bn, while Abia and Anambra recorded N319.91bn and N290.74bn, respectively.
Oyo also more than doubled its capital expenditure to N423bn.
Despite the increase in capital spending, BudgIT cautioned that higher expenditure on projects does not automatically translate into improved development outcomes, emphasising the importance of project selection, execution and the direct benefits to citizens.
The report also identified significant differences in the debt positions of state governments.
Lagos recorded a total debt stock of approximately N2.90tn at the end of 2025, while Ogun’s debt stood at N538.92bn, making it the fourth most indebted state in the assessment.
Enugu’s total debt increased by 18.98 per cent to N300.95bn, alongside a fiscal deficit of N110.95bn.
In contrast, Abia and Anambra reduced their total debt stocks by 8.86 per cent and 15.49 per cent, respectively.
However, foreign currency-denominated obligations remained a major source of vulnerability, accounting 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.
