Nigeria's 36 state governments have recorded a substantial increase in public revenues following major economic reforms, but the World Bank has raised concerns over the declining proportion of government expenditure directed towards education. The development has brought renewed attention to how state administrations manage additional public resources, particularly as millions of Nigerians depend on government-funded schools, healthcare facilities and other essential services.
The findings were disclosed on Thursday, October 8, 2026, in Abuja, through the World Bank's latest Nigeria Development Update, featuring a special report titled "Beyond the Federal Purse: How Higher Revenues Reshaped State Priorities." The assessment, presented amid discussions involving Nigerian economic authorities, including Finance Minister Taiwo Oyedele, revealed that aggregate state revenues increased by approximately 93 per cent in real terms between 2023 and 2025, while overall expenditure rose by 92 per cent.
According to the international financial institution, the increase followed economic reforms introduced under President Bola Ahmed Tinubu's administration, including the removal of petrol subsidies, foreign exchange adjustments and improvements in revenue administration. These measures contributed to higher federation revenues, enabling state governments to receive increased statutory allocations alongside additional proceeds from Value Added Tax collections, intervention funds and the settlement of outstanding federal obligations.
The World Bank explained that gross federation revenues increased by 69 per cent in real terms during the period under review. State governments emerged as major beneficiaries, receiving additional financial resources that expanded their capacity to fund development projects, meet financial obligations and strengthen public services. The reported increases were calculated using inflation-adjusted figures, meaning they represented growth beyond changes in nominal monetary values.
Despite this improvement, the distribution of expenditure revealed a significant shift in government priorities. Education's share of total state spending declined from 14.9 per cent in 2021 to 12.1 per cent in 2025. Although actual education expenditure increased during the period, it expanded more slowly than spending on infrastructure, reducing its relative importance within the overall expenditure structure.
The distinction between declining expenditure shares and actual funding reductions is important. The World Bank did not report that states collectively spent less money on education in absolute or inflation-adjusted terms. Instead, its findings showed that education received a smaller proportion of a substantially larger pool of public expenditure, indicating that other sectors experienced faster growth in government investment.
Available figures indicate that inflation-adjusted education spending increased from approximately ₦500 billion in 2021 to ₦1.1 trillion in 2025. Nevertheless, the declining percentage allocated to education raises concerns about whether the pace of investment is sufficient to address existing challenges involving classroom infrastructure, teacher availability, learning materials and access to quality schooling.
Infrastructure emerged as the principal beneficiary of increased state spending. Capital expenditure rose from 46 per cent of total spending in 2023 to 61 per cent in 2025, with transport infrastructure recording the largest increase. Governments also expanded investments in housing, agriculture and other economic activities intended to support development, improve connectivity and strengthen productive capacity.
World Bank Chief Economist for Nigeria, Dr Fiseha Haile, explained that transport expenditure, particularly road infrastructure, accounted for a substantial proportion of the shift. Available assessments showed that spending priorities moved towards economic infrastructure in 29 of the 33 states examined, demonstrating that the trend extended across much of the federation rather than being restricted to individual administrations.
Healthcare spending followed a different pattern. Although expenditure increased in real terms, its proportion of total state spending remained broadly stable at approximately seven per cent. Social protection, meanwhile, recorded a stronger relative improvement, rising from 1.4 per cent of expenditure in 2021 to 4.4 per cent in 2025, reflecting increased allocations towards programmes designed to support vulnerable populations.
Mathew Verghis, the World Bank Country Director for Nigeria, acknowledged the financial opportunities created by the reforms while emphasising the importance of translating increased revenues into measurable improvements in citizens' lives. He identified infrastructure, education, healthcare and water services as essential areas where effective public investment could contribute to employment opportunities and stronger economic development.
The World Bank maintained that spending efficiency, accountability and service delivery would determine whether higher public revenues produce lasting benefits. Its assessment recognised improvements in fiscal reporting, transparency and internally generated revenue among state governments, while recommending further measures to strengthen public financial management and ensure that available resources deliver meaningful outcomes.
The findings are particularly significant for Nigeria's education sector, where longstanding funding challenges continue to affect access and learning outcomes. A September 2026 UNICEF assessment highlighted persistent weaknesses in foundational education, reporting that substantial proportions of pupils assessed in earlier studies had failed to demonstrate minimum proficiency in mathematics and reading.
UNICEF also identified chronic underfunding as a major challenge, noting that education's share of combined government expenditure declined from 9.3 per cent in 2015 to 3.6 per cent in 2023. Those nationwide figures cover a different expenditure measure from the World Bank's state-level assessment, but both indicate the importance of examining how public education is financed.
The World Bank's wider economic assessment reported that Nigeria's real gross domestic product expanded by 4.2 per cent during the first half of 2026, compared with 3.9 per cent during the corresponding period of 2025. Services and agriculture contributed to the improvement, while higher oil prices supported government revenues and export earnings.
Nevertheless, inflation continued to affect household purchasing power, despite falling from 27.6 per cent in January 2025 to 15.2 per cent in December. The institution projected average annual economic growth of 4.4 per cent between 2026 and 2028, conditional on sustained reforms, improved public services and stronger conditions for private investment.
For state governments, the report presents a clear public finance challenge: balancing visible infrastructure development with sustained investment in education and healthcare. Roads and other capital projects can support economic activity, but the World Bank's findings underline the importance of ensuring that improvements in government finances also strengthen services that directly influence people's opportunities and living standards.
The central issue is therefore not simply how much additional revenue Nigeria's states receive, but how effectively those resources are distributed and utilised. As state administrations continue implementing their budgets, the World Bank's assessment provides a basis for examining whether rising public income is accompanied by stronger educational opportunities, improved healthcare and measurable improvements in citizens' welfare.
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