Only Two Nigerian States Can Operate Independently of Federal Funding – BudgIT Report

Only Lagos and Rivers states can independently cover their operational costs without federal support, according to BudgIT’s latest “2024 State of States Report.” Launched in Abuja on Tuesday, the report highlights a critical fiscal imbalance, revealing that the majority of Nigerian states remain heavily dependent on the Federation Account Allocation Committee (FAAC) revenue to sustain their operations.

The report emphasizes that both Lagos and Rivers states surpass the threshold, generating sufficient Internally Generated Revenue (IGR) to cover their operating expenses with IGR-to-operating expense ratios of 121.26 percent and 118.39 percent, respectively. This financial independence sets them apart as the only states capable of sustaining their budgets without the need for federal allocations.

BudgIT also reported that states including Ogun, Anambra, Cross River, Kwara, Kaduna, and Edo manage to generate IGR that can cover at least half of their operational costs. However, these states still depend on federal allocations for the remaining balance.

A broader look at the fiscal health of the 36 states reveals that 32 states relied on FAAC revenue for at least 55 percent of their total income in 2023, with 14 states depending on FAAC for 70 percent of their revenue. Additionally, 34 states, excluding Lagos and Ogun, are reported to rely on FAAC transfers for 62 percent of their recurrent revenue, while 21 states rely on federal transfers for a substantial 80 percent or more of their recurrent budgets.

Despite these challenges, BudgIT noted a notable increase in state revenues over the past year. In 2023, the combined revenue of all 36 states rose by 31.2 percent, from N6.6 trillion in 2022 to N8.66 trillion.