Nigeria’s 36 states recorded a 93 percent increase in real revenues between 2023 and 2025, but the education sector received a declining share of government expenditure, raising concerns about the country’s commitment to human capital development despite improved public finances.
The World Bank disclosed this in its latest Nigeria Development Update, which examined how increased public revenues have influenced spending priorities across the federation.
The report showed that while states recorded significant revenue growth, education’s share of total expenditure declined from 14.9 percent in 2021 to 12.1 percent in 2025.
The decline came amid increased fiscal resources available to state governments following major economic reforms introduced by the federal government, including the removal of petrol subsidies and changes to the foreign exchange regime.
According to the report, aggregate state revenues increased by approximately 93 percent in real terms during the period, while expenditure rose by 92 percent.
The World Bank attributed the revenue improvement partly to exchange-rate reforms, petrol subsidy removal, stronger revenue administration, and increased allocations from the federation account.
States also benefited from refunds, the settlement of longstanding federal obligations, intervention funds, and improved value-added tax collections.
However, the bank’s findings indicated that the increase in available resources did not translate into a larger share of state budgets for education, a critical sector for developing the skills and knowledge needed to support economic growth and employment.
The report showed that health expenditure remained broadly stable at approximately 7 percent of total state spending, while social protection’s share increased from 1.4 percent to 4.4 percent.
Capital expenditure recorded a substantial increase, accounting for 61 percent of total state spending, compared with 46 percent previously.
Transport infrastructure recorded the largest increase in capital investment, alongside significant spending on housing, agriculture, and other economic activities.
The shift suggests that state governments have placed greater emphasis on infrastructure and other capital projects, even as education’s share of expenditure declined.
The World Bank, however, stressed that increased public revenues presented an opportunity for governments to improve infrastructure and strengthen essential public services, including education, healthcare, and access to water.
Mathew Verghis, the World Bank Country Director for Nigeria, said the additional resources available to governments should be used to improve the welfare of citizens.
He emphasised that stronger spending efficiency, accountability, and service delivery were essential to ensuring that increased public revenues produced tangible benefits for Nigerians.
The bank acknowledged improvements in states’ fiscal reporting, transparency and internally generated revenue, but maintained that more needed to be done to ensure public resources translated into better outcomes for citizens.
It stressed that stronger investment in human capital was necessary to convert the gains from economic reforms into sustainable employment opportunities and improved living standards.
The report also projected that Nigeria’s economy would grow by an average of 4.4 percent between 2026 and 2028, provided the government sustained reforms and improved service delivery.
It urged federal and state authorities to ensure that increased public revenues resulted in measurable improvements.
Nigeria’s fiscal landscape has changed significantly following the removal of petrol subsidies and foreign exchange reforms introduced by President Bola Tinubu’s administration in 2023. The measures, alongside changes in revenue distribution and collection, have increased the funds available to governments at different levels.
However, higher allocations have come amid persistent concerns over the cost of living, poverty, unemployment, and the quality of public services.
Education remains central to addressing these challenges, particularly as Nigeria faces the need to improve learning outcomes, expand access to quality schooling and equip young people with skills required by the labour market.
The World Bank’s findings highlight the importance of how governments allocate and manage public resources, suggesting that increased revenue alone may not deliver better living standards without effective spending priorities, transparency and accountability.
The projected average economic growth of 4.4 percent between 2026 and 2028 therefore depends not only on sustaining economic reforms but also on ensuring that their benefits reach households through improved public services, productive investment, and stronger human capital development.
