Foreign exchange reforms and higher oil receipts have left Nigeria’s governments richer than ever — over ₦13 trillion in 2024 alone. Yet citizens remain poorer. This article (part 1 of 5) shows that Nigeria’s crisis is not of revenue but of mindset — a culture of dependence and misplaced priorities.
By Nurudeen O. Alimi
It bears repeating: Nigeria is not broke.
If anything, the nation’s governments — federal and state — have never handled this much money.
BudgIT’s State of the States 2025 Report shows that the 36 states collectively received ₦11.38 trillion from the Federation Account (FAAC) and generated ₦2.36 trillion internally last year. The Federal Government earned roughly ₦11.3 trillion of its own. In total, more than ₦25 trillion coursed through public accounts in one fiscal year.
Yet, poverty deepened. Inflation climbed. Citizens grew poorer even as governments grew richer.
How did we arrive here?
When Exchange Rates Made Governments Richer — and Citizens Poorer
The turning point came with the foreign-exchange unification policy. When the Central Bank allowed the naira to float, the official rate jumped from about ₦450 to ₦1,400 – ₦1,600 per US dollar. The same barrel of oil suddenly yielded three times more naira.
That change made government revenues lookimpressive. FAAC disbursements nearly doubled — not because Nigeria produced or earned more, but because the currency was worth less.
In effect, the federal and state treasuries swelled while the people’s purchasing power shrank. Prices of food, rent, and fuel soared. What strengthened the balance sheets of government weakened the wallets of citizens.
Record Revenues, Rising Borrowing
At the federal level, the irony is striking. In 2024, Abuja earned its highest revenue in history — yet borrowed ₦7.8 trillion to balance the budget.
A government that earns more but borrows more mirrors a family that celebrates a salary increase while sinking deeper into debt.
This pattern is not new; it is cultural. Each month, representatives of all 36 states queue in Abuja for FAAC allocations. The ritual has turned the Federation Account into a national feeding bottle — rewarding dependency instead of productivity.
The States’ Dependence Dilemma
Across the states, the same dependence persists. On average, 73 percent of every state’s income still comes from FAAC.
These are oil-producing states, yet they remain economically fragile without Abuja’s allocation.
Only Lagos State stands apart. With ₦1.9 trillion in IGR, it out-earns more than twenty other states combined. Even so, Lagos faces its own strains — rising debt, urban congestion, and limited fiscal autonomy under a centralised system.
When Governments Mirror Each Other
Federal and state governments differ in scale but not in behaviour. Both:
Between 2015 and 2024, FAAC inflows to states rose by over 200 percent, yet the national poverty rate reached 61 percent. That is not a revenue problem; it is a governance problem.
How the States Stack Up
BudgIT’s latest index sorts Nigeria’s 36 states into three broad groups.
Their rankings show that the issue is not how muchmoney they receive, but how wisely they use it.
High-Performing States
Lagos, Anambra, Kwara, Abia, Edo, Ogun, Nasarawa, Ekiti
These states demonstrate fiscal discipline — balancing recurrent and capital spending, improving transparency, and managing debt prudently.
They earn smart, spend wisely, and deliver tangible results.
Mid-Performing States
Oyo, Ondo, Akwa Ibom, Delta, Bayelsa, Enugu, Cross River, Kaduna, Benue, Osun, Plateau, FCT
They have the means but not yet the mindset. Budgets are large; results inconsistent. Some invest in infrastructure but carry heavy debts. Others receive windfalls yet fail to diversify.
They have money in hand but half-measured reform in practice.
Low-Performing States
Kogi, Jigawa, Yobe, Katsina, Zamfara, Kebbi, Taraba, Adamawa, Gombe, Borno, Sokoto, Niger
These remain highly FAAC-dependent, with weak IGR, minimal transparency, and limited capital investment.
They survive, not thrive — proof that allocation alone cannot buy progress.
The FX Illusion
Foreign-exchange unification created a revenue mirage.
Budgets look bigger because the naira is weaker, but purchasing power has eroded. The ₦500 billion a state received last year now buys what ₦300 billion bought two years ago.
Without structural reform, this “wealth” is only numerical — a case of inflated naira, deflated value.
Changing the Fiscal Mindset
Real reform begins with mindset, not money.
States that expand their IGR and manage debt responsibly should receive incentives — performance-based grants, better borrowing terms, or targeted infrastructure support.
Every tier of government must publish clear reports on revenue and expenditure, especially the FX-driven windfalls. Citizens should see where the money goes — not just where it came from.
Abuja should devolve more resource control to the states, but autonomy must come with accountability. Fiscal freedom without transparency is simply decentralised waste.
Final Reflection
Nigeria’s fiscal story today is that of a nation earning more yet achieving less.
The State of the States Report is not merely a financial document; it is a mirror — reflecting a country where wealth has risen but wisdom has not.
Until governments at every level replace dependency with discipline, and politics with productivity, Nigeria will continue to produce rich budgets and poor citizens.
Because, ultimately, it is not the naira that is weak — it is our will to use it well.
