Ben Eguzozie
Most of the sub‑nationals that have tabled their 2026 budgets went for little below or above the trillion‑naira mark. Perhaps, except for Lagos, the subnationals are counting on the same three‑tier revenue pot that every state gets from the federal pool, plus a few extra streams they try to crank up through internally generated revenues.
Development analysts raise certain questions: what revenue streams are the sub‑nationals betting on to hit their trillion-naira mark? How will the looming fiscal deficit shape their spending priorities in 2026?
Lagos budgeted N4.32 trillion, Delta tabled N1.6 trillion, Akwa Ibom went for N1.39 trillion, Abia appropriated N1.1 trillion, Ebonyi’s governor, Francis Nwifuru tabled N0.885 trillion, Cross River’s Bassey Otu proposed N0.780 trillion, Anambra N0.757 trillion, Imo and Enugu are yet to present their 2026 appropriations.
Up north, Kano’s Governor Abba Kabir Yusuf presented N1.368 trillion. In Katsina, Governor Dikko Umaru Radda has already signed the N0.897 trillion 2026 budget into law. For Plateau, Governor Caleb Muftwang proposed N0.914 trillion, Nasarawa’s governor Abdulhali Sule sent a N0.517 trillion budget proposal to the state Assembly, Jigawa went for N0.693 trillion. Rivers, with the second biggest subnational economy, is waiting for completion of its N19.6 billion state Assembly rebuilding work, before Governor Siminalayi Fubara presents its 2026 appropriation bill.
By far, Federation Account Allocations Committee (FAAC) allocations is the big cheque –hands out the bulk of a state’s money each month. In 2024, the 36 states together received N5.38 trillion, with oil‑rich states like Delta, Rivers and Akwa Ibom getting the biggest slices (N485 billion, N384 billion, and N338 billion, respectively).
The vertical formula gives states 26.72 per cent of total federation revenue, while local governments get 20.60 per cent. Because the pool is driven by oil sales, exchange gains and VAT, any uptick in those numbers lifts the whole allocation.
In addition, Value-Added Tax (VAT) redistribution is a major source of federal revenue, and the way it is shared is deliberately redistributive.
Lagos and Rivers contribute the lion’s share of VAT (N249.77 billion and N70.54 billion in 2024) but receive only a fraction of what they put in (N40.22 billion for Lagos and N15.54 billion for Rivers in 2024, according to National Bureau of Statistics data). Contrariwise, lower‑contributing states such as Kano, Anambra and Akwa Ibom get back more than they pay, which helps them balance their books.
For the 2026 budgets, states that are net VAT receivers are hoping the continued growth in VAT collections (up 27 % in the latest 12‑month period) will keep that extra cushion flowing. Derivation fund (13 % of oil revenue) of the net mineral revenue before the rest is pooled go to oil‑producing states. In 2024 the derivation pool hit N1.135 trillion, a massive jump from the previous year. Akwa Ibom already enjoys an allocation that exceeds its VAT contribution thanks to this fund.
In internally generated revenue (IGR), only a few of the states are able to crank up reasonable amounts. A 2024 State Internally Generated Revenue (IGR) report showed that Nigerian states collectively generated N3.63 trillion, a 49.7 per cent increase from 2023, with Lagos State accounting for an impressive 35 per cent share at N1.26 trillion.
Rivers and the FCT followed with N317 billion and N282 billion, respectively. Ogun and Enugu completed the top five.
The above analysis shows that 74 per cent of total revenue stemmed from taxes, with the South-West leading all the zones at 41.4 per cent of national IGR. This emphasises Lagos’s economic supremacy, and the widening fiscal disparities among Nigeria’s regions.
In the 2025 stakeholders’ interaction on 2025 appropriation earlier in January, the Senate urged the states to enhance their own tax bases. Till date, reports show that many subnationals still depend on FAAC for 60‑90 per cent of their revenues. Some are leveraging state‑owned assets, example, Akwa Ibom taps on its Ibom Power Company to raise IGR. The goal is to shrink the dependence gap, but the progress is uneven.
A 2024 IGR outlay showed Lagos chalked up N1.26 trillion, Rivers N317 billion, FCT N282 billion, Ogun N146.88 billion (2023), Delta N114.09 billion (2023), Kaduna N62.49
billion (2023).
Bonds investment is still novel to many Nigerian states – apart from Lagos with a history of bonds issuance, including the N244.8 billion issued in 2025 to fund projects, others states shy away. The federal government’s zero‑based budgeting framework forces states to justify every line, so they are looking at external financing only as a last resort.
It appears, the trillion‑naira ambitions by most states are being underpinned primarily by federal transfers (FAAC + derivation), redistributed VAT, and modest IGR lifts. The big “if” is whether the Nigerian national economy can shake off its current low‑production slump and keep the oil‑revenue stream robust enough to sustain these outlays.
