Market News

By Damilola Aina

The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr Taiwo Oyedele, has projected that states could earn more than N4tn annually from 2026, when new Value Added Tax reforms take effect.

Oyedele made this disclosure on Tuesday at the launch of the BudgIT State of States 2025 Report in Abuja, where he delivered the keynote address.

The event also marked the 10th anniversary of the initiative.

He said, “With VAT reforms kicking in from 2026, states’ share will rise to 55 per cent. That could amount to over N4 tn in 2026. The question is: will this money be spent, or will it be invested?”

The fiscal policy expert noted that while recent economic reforms had more than doubled the Federation Account Allocation Committee transfers, from N5.4tn in 2023 to N11.4tn in 2024, many Nigerians were yet to feel any direct relief.

According to him, governments now have more money in their coffers, but households continue to struggle with reduced disposable income.

“States are receiving more money than ever before. But there is a paradox: while governments have more naira, ordinary Nigerians have less disposable income in their pockets,” he said, urging state leaders to channel the extra revenues into projects that tangibly improve citizens’ lives.

The BudgIT report highlighted that 21 states still rely on federal allocations for over 70 per cent of their revenues, a trend Oyedele described as worrying.

However, he pointed to examples of progress, including Enugu’s 381 per cent growth in internally generated revenue and Bayelsa’s 174 per cent rise.

He explained that the new tax laws, which transfer the full proceeds of electronic money transfer levies to states and exempt state government bonds from tax, would help reduce borrowing costs and create fiscal space.

“This is a unique opportunity for states to build resilience, close existing tax gaps, and invest in infrastructure,” he stressed.

The keynote speech also drew attention to the mismatch between spending and outcomes. Oyedele acknowledged that, for the first time in many years, capital expenditure had overtaken recurrent expenditure.

Yet, he warned that implementation in critical areas remained poor.

“States implemented only two-thirds of their education budgets, spending less than N7,000 per citizen. In health, implementation was even lower, at just N3,500 per citizen,” he observed.

On debt, he noted a reduction of N2tn in domestic obligations and a $200m fall in foreign loans, with 31 states lowering their domestic debt stock.

Still, states owe over N1.2tn in arrears to pensioners, contractors, and workers.

“Borrowing is not the problem; unproductive application of debt is,” he cautioned.

According to the 2025 rankings, Anambra topped the fiscal performance table, followed by Lagos, Kwara, Abia, and Edo. Cross River, however, slipped dramatically from fifth position in 2024 to 29th in 2025, raising concerns about governance choices.

Oyedele urged state governments to seize the opportunity provided by upcoming reforms to move beyond survival and ensure shared prosperity.

Also speaking, the Deputy Governor of the Central Bank of Nigeria in charge of Economic Policy, Dr Muhammad Abdullahi, called on state governments to entrench fiscal discipline and transparency as revenues surge under ongoing reforms.

He described the BudgIT report as an annual reference point that has “distilled hard fiscal truths, benchmarked performance, and re-centred conversations on capital investment, social outcomes, and fiscal credibility.”

He noted that while reforms in 2024 and 2025 had expanded revenues and pushed capital expenditure above recurrent spending, states must not slip back into a pattern where overheads dominate budgets.

“The challenge is to lock in this fiscal discipline permanently,” he said.

The CBN deputy governor urged states to digitise internal revenue systems, complete Treasury Single Account adoption, and strengthen capital budgeting.

He also called for higher execution of education and health budgets, insisting that implementation must rise above 80 per cent.

Abdullahi warned that subnationals remained highly exposed to foreign currency risks. He disclosed that the CBN was developing an instrument to help them hedge exposures and monetise revenues.

Reviewing the broader macroeconomic environment, Abdullahi said Nigeria had inherited severe distortions, including multiple exchange rates, heavy deficit financing through Ways and Means, and dwindling reserves.

According to him, the apex bank’s response was to return to orthodox monetary policy, normalise the foreign exchange market, and restore credibility.

He concluded that states which prioritise discipline and capital investment, rather than simply relying on higher revenues, would achieve sustainable transformation.

In his goodwill message, the Head of Economic Intelligence at the Nigerian Governors’ Forum, Razaq Fatai, who represented the Director-General, Dr Abdulateef Shittu, said the State of States report had become a valuable tool for guiding governance and promoting fiscal accountability across the country.

He explained that the NGF had served as a technical partner in refining the report over the past decade, ensuring that governors used the findings to improve decision-making.

According to him, “The essence of State of States is to help guide governance and ensure that governors at different levels take the information provided and make sure it reaches their people.”

Fatai noted that initiatives such as the State Fiscal Transparency, Accountability and Sustainability programme had strengthened budget credibility and debt transparency, while the ongoing State Action on Business Enabling Reforms programme was pushing states to improve the business climate.

He added that the NGF would continue to provide a platform for peer learning and collaboration to entrench transparency and accountability at the subnational level.

Speaking earlier, the Co-founder and Global Director of BudgIT, Oluseun Onigbinde, said the State of States report had become a mirror reflecting the choices made by subnational governments.

Onigbinde noted that what began as an effort to make every kobo traceable had grown into a tool of accountability embraced by both governors and citizens.

“This report began with a simple belief, that every kobo meant for citizens should be traceable, justified, and used to improve lives,” he said.

He added that transparency had become a competitive advantage among states, with more governors publishing budgets and citizens using data to demand accountability.

Onigbinde, however, warned that Nigeria remained at a crossroads, with rising inflation, growing debt, and an overreliance on federal allocations leaving many states unable to build resilient local economies.

He urged states to prioritise education, health, and infrastructure while using transparency as a foundation for public trust and give investors returns on their finances.