By Iroyin Yoruba Television
Nigeria's 36 states and the Federal Capital Territory generated a combined ₦5.15 trillion in internally generated revenue during 2025, representing a 40.93 per cent increase from the ₦3.65 trillion recorded in 2024.
The latest figures provide a detailed picture of how Nigeria's subnational governments raised money from taxes and other internally generated sources during the year, while also revealing substantial differences in the ability of individual states to mobilise revenue from their local economies.
Lagos accounted for the largest share of the combined collection, generating about ₦1.77 trillion. Rivers State followed with ₦428.42 billion, while Enugu State recorded ₦406.77 billion. The Federal Capital Territory generated ₦356.34 billion, and Ogun State recorded ₦252.36 billion.
The figures were contained in the latest Internally Generated Revenue at State Level report released by the National Bureau of Statistics.
The report is important because internally generated revenue provides states with a source of funding that is separate from allocations received through the federation account and other intergovernmental transfers.
The increase recorded in 2025 therefore represents a substantial expansion in the amount of revenue that state governments reported collecting from economic activity within their jurisdictions.
TOTAL REVENUE ROSE BY ABOUT ₦1.5 TRILLION
The movement from ₦3.65 trillion in 2024 to ₦5.15 trillion in 2025 represents an increase of approximately ₦1.5 trillion in one year.
That growth was not distributed evenly among the 37 jurisdictions covered by the report.
Some states recorded hundreds of billions of naira in internally generated revenue, while others collected less than ₦30 billion for the entire year.
The difference reflects the varying size and structure of state economies, the concentration of formal employment, business activity, property transactions, taxation systems and other revenue-generating activities.
The figures also demonstrate why internally generated revenue has become an increasingly important issue in discussions about fiscal sustainability at the subnational level.
States have responsibilities for infrastructure, healthcare, education, security support, environmental management and other public services.
The ability to generate revenue locally can give a government greater financial capacity to support these responsibilities.
However, the quality of revenue collection matters alongside the amount collected.
A state that increases revenue through more efficient administration and a broader formal tax base faces a different situation from one that increases collections mainly by imposing heavier financial burdens on an already limited group of taxpayers.
LAGOS CONTRIBUTED MORE THAN ONE-THIRD
Lagos remained the largest contributor to the combined figure.
The state generated ₦1.769 trillion in 2025, including approximately ₦1.48 trillion in tax revenue and ₦292.64 billion from ministries, departments and agencies.
Its total represented roughly 34.4 per cent of the combined IGR reported by the states and the FCT.
The size of Lagos's contribution reflects the scale of economic activity within the state.
As Nigeria's largest commercial centre, Lagos has a broad tax base encompassing formal employment, businesses, property-related activities and numerous commercial transactions.
The concentration of revenue in Lagos also demonstrates the uneven economic geography of Nigeria.
A state with a large formal economy and substantial commercial activity has more opportunities to collect taxes and fees than a state where economic activity is smaller or predominantly informal.
The figures should therefore not be interpreted simply as a measurement of administrative performance.
They also reflect differences in population, economic structure, employment patterns and the concentration of businesses.
RIVERS AND ENUGU FOLLOWED
Rivers State recorded ₦428.42 billion in internally generated revenue, placing it second among the jurisdictions covered.
The state's figure included approximately ₦414.38 billion in tax revenue and ₦14.03 billion from ministries, departments and agencies.
Enugu State recorded ₦406.77 billion and occupied the third position.
The composition of Enugu's revenue was notably different. The state generated about ₦51.52 billion in tax revenue while its ministries, departments and agencies accounted for approximately ₦355.25 billion.
That difference illustrates an important feature of the NBS data: internally generated revenue does not come exclusively from conventional taxation.
States can record significant income through government agencies and other internally generated sources.
The structure of those collections can vary considerably between jurisdictions.
FCT AND OGUN ALSO EXCEEDED ₦250 BILLION
The Federal Capital Territory generated ₦356.34 billion in 2025, placing it fourth overall.
Ogun State followed with ₦252.36 billion.
Other major contributors included Delta State with ₦202.49 billion, Edo with ₦132.21 billion, Oyo with ₦103.25 billion, Kano with ₦102.26 billion and Akwa Ibom with ₦100.80 billion.
The figures show that only a relatively small group of jurisdictions generated more than ₦100 billion in IGR.
A much larger number operated with substantially smaller revenue bases.
That disparity is one of the most important findings in the latest data because it highlights the different fiscal capacities available to state governments.
States with larger internally generated revenues potentially have greater flexibility to finance programmes from local resources, although their expenditure responsibilities and population sizes also differ.
TAXES REMAIN THE MAIN SOURCE
Tax revenue accounted for ₦3.79 trillion, representing 73.64 per cent of the combined internally generated revenue of the states and FCT.
Revenue generated through ministries, departments and agencies contributed approximately ₦1.36 trillion, or 26.36 per cent.
The dominance of taxation is significant because it shows that the formal tax system remains the principal mechanism through which subnational governments raise internal revenue.
Within tax revenue, Pay-As-You-Earn tax was the largest component.
PAYE generated ₦2.64 trillion, accounting for 69.51 per cent of total tax revenue.
Other categories included direct assessment, road taxes, stamp duties, withholding taxes, capital gains tax and other taxes.
Capital gains tax generated only ₦12.40 billion, making it the smallest contributor among the reported tax categories.
WHY PAYE IS SO IMPORTANT
The dominance of PAYE provides insight into the structure of taxable economic activity.
PAYE is collected from income earned by employees through the formal employment system.
Its large contribution means that formally employed workers represent a major component of the tax base available to state governments.
This also has implications for the relationship between employment and public revenue.
When formal employment expands, governments can potentially collect more PAYE without necessarily increasing tax rates.
Conversely, when workers move into informal employment or businesses reduce their formal workforce, the available tax base can become more limited.
This is one reason job creation and revenue mobilisation are closely connected.
An expanding formal economy can increase tax collections while also increasing household incomes and economic activity.
THE IMPORTANCE OF FORMALISATION
The revenue figures also bring attention to the size of Nigeria's informal economy.
Many businesses and workers operate outside the full formal tax system.
That does not necessarily mean they are avoiding taxes deliberately. Informal operators can face challenges involving registration, record keeping, digital payments, business addresses and understanding of tax obligations.
For governments, bringing more economic activity into the formal system can potentially expand the tax base.
But successful formalisation requires careful administration.
If small businesses believe that registration will expose them to disproportionate costs or complicated procedures, they may remain informal.
A broader revenue base therefore depends not only on enforcement but also on creating systems that make compliance understandable and manageable.
REVENUE DIFFERENCES ACROSS STATES
The contrast between the highest and lowest revenue-generating jurisdictions is substantial.
Lagos recorded ₦1.77 trillion, while Yobe generated ₦16.01 billion and Ebonyi recorded ₦17.18 billion.
Sokoto reported ₦20.48 billion, while Taraba generated ₦28.16 billion and Benue ₦29.57 billion.
These differences highlight the varying economic capacity of Nigerian states.
A state with a relatively small formal economy may have fewer opportunities to collect PAYE and business-related taxes.
Agriculture-dominated economies can also have large amounts of economic activity that are not captured easily through conventional tax systems.
This does not mean such economies are unproductive.
Rather, it shows that economic output and taxable revenue are not always the same thing.
ENUGU'S REVENUE STRUCTURE STANDS OUT
Enugu's position in the figures is particularly notable because much of its reported IGR came through ministries, departments and agencies rather than conventional taxes.
The state recorded about ₦406.77 billion in total IGR, but only approximately ₦51.52 billion came from tax revenue.
The remaining approximately ₦355.25 billion came through MDAs.
This illustrates why examining only total revenue can sometimes conceal important differences in how governments generate income.
Two states may record similar total IGR figures while relying on completely different revenue structures.
For policymakers and researchers, understanding that composition is important when evaluating the sustainability of revenue.
Tax collections may respond to changes in employment and business activity, while agency-generated revenue can depend on specific services, government assets, administrative charges or other sources.
WHAT HIGHER IGR MEANS FOR STATES
Higher internally generated revenue can give states additional financial resources for public expenditure.
Potential areas include road construction and maintenance, schools, hospitals, water infrastructure, environmental management and other public services.
However, increased revenue does not automatically guarantee better services.
The impact depends on how governments allocate and manage the money collected.
A state can record strong revenue growth while still facing substantial expenditure obligations.
Population size, infrastructure deficits, wage bills, debt servicing and other commitments all affect the amount of money available for new projects.
Consequently, IGR figures should be viewed as one component of a state's fiscal position rather than a complete measure of its financial health.
THE ROLE OF DIGITAL TAX SYSTEMS
Technology is becoming increasingly important in revenue administration.
Digital taxpayer registration, electronic payment systems, automated records and data matching can help governments identify taxable activity and reduce reliance on manual processes.
Digital systems can also make it easier for taxpayers to make payments and obtain documentation.
For businesses, predictable and transparent digital procedures can reduce some of the administrative burden associated with tax compliance.
For governments, digital systems can improve visibility over economic transactions and potentially reduce leakage.
The success of such systems depends on accurate data, cybersecurity, reliable connectivity and public confidence.
Digitalisation cannot by itself solve weaknesses in tax administration, but it can provide tools for improving the process.
THE RISK OF OVER-TAXATION
As states seek to increase internal revenue, the balance between mobilisation and economic activity becomes important.
Businesses already face expenses associated with energy, transportation, labour, financing and other operating costs.
Multiple taxes and charges imposed by different government levels can add to that burden.
If revenue authorities pursue collections without coordination, businesses may face overlapping demands.
That can discourage formalisation and investment.
A more sustainable approach involves expanding the number of taxpayers and improving collection efficiency rather than relying disproportionately on a small group of existing taxpayers.
This is particularly important for states seeking to attract investment.
Investors typically consider the overall cost of doing business when deciding where to establish operations.
REVENUE AND FISCAL INDEPENDENCE
The new figures also raise questions about the long-term financial relationship between states and the federal government.
Nigeria's states receive statutory allocations and other transfers, but internally generated revenue provides an additional source of funding.
States with stronger local revenue systems may have greater capacity to finance projects without depending entirely on federal transfers.
For lower-revenue states, the challenge is more complex.
Some have limited formal economic activity and may need significant investment before their own revenue base can expand substantially.
This creates a cycle that can be difficult to break.
Limited revenue reduces the money available for infrastructure.
Weak infrastructure can discourage investment.
Lower investment limits economic expansion.
Slower economic expansion then restricts the potential tax base.
Breaking that cycle requires more than simply demanding higher tax collections.
It requires economic development that creates more businesses, jobs and productive activity.
WHAT THE FIGURES SAY ABOUT NIGERIA'S ECONOMY
The ₦5.15 trillion combined IGR figure provides another indication that economic activity and revenue collection are expanding in parts of Nigeria.
However, the concentration of collections also reveals a significant structural imbalance.
Lagos alone accounted for about one-third of the national subnational total, while a number of states generated less than ₦40 billion each.
The top three jurisdictions — Lagos, Rivers and Enugu — together generated about ₦2.60 trillion, or slightly more than half of the combined amount.
This concentration means that Nigeria's overall improvement in state-level revenue does not necessarily mean that every state experienced a comparable improvement.
Some states may have made substantial progress, while others continue to operate with relatively narrow revenue bases.
That distinction matters when assessing the broader economy.
WHAT STATES CAN DO NEXT
The new revenue data provides several areas that state governments can examine.
Improving taxpayer identification can help broaden the revenue base.
Better digital collection systems can reduce administrative weaknesses.
Supporting businesses can expand the number of taxable enterprises.
Investment in infrastructure can make states more attractive to companies.
Improved employment opportunities can expand PAYE collections.
Agricultural processing and industrial development can create formal economic activity in states whose economies are currently dominated by lower-tax-yield sectors.
Each of these measures has a longer-term dimension.
A government cannot create a large revenue base overnight.
Economic activity has to develop before it can generate substantial sustainable taxation.
This makes policies that encourage businesses to invest and create jobs relevant to revenue mobilisation.
A REVENUE INCREASE WITH A LARGER QUESTION
The 40.93 per cent rise in internally generated revenue is a significant change in the amount collected by Nigeria's states and FCT.
But the more important economic question is what happens next.
If the increase reflects stronger economic activity, improved tax administration and greater formalisation, it could provide a foundation for more sustainable state finances.
If revenue growth depends mainly on higher collections from an unchanged taxpayer base, there may be limits to how far the trend can continue.
The composition of revenue will therefore remain important.
PAYE's dominance shows the central role of formal employment, while the large MDA collections reported by some states demonstrate the importance of non-tax revenue.
For Nigeria's states, the challenge is to build revenue systems that can grow alongside their economies.
That means encouraging productive investment, supporting businesses, expanding employment, improving tax administration and ensuring that public revenue is used efficiently.
The latest figures show that Nigeria's subnational governments generated substantially more internal revenue in 2025 than they did a year earlier.
They also show that the country's revenue-generating capacity remains highly uneven.
The next stage is not simply to collect more money, but to create stronger local economies capable of generating sustainable revenue without placing excessive pressure on households and businesses.
That distinction will be important as states seek greater financial capacity to fund development and reduce their vulnerability to changes in federal transfers and other external sources of income.