The Subnational Question: How States Can Turn the FAAC Surge into Devt

Any serious conversation about Nigeria’s states should begin with the development indices. The National Bureau of Statistics’ Multidimensional Poverty Index found 133 million Nigerians, 63 percent of the population, poor across health, education, living standards and work. The crucial finding is the spread. Poverty ranges from 27 percent in Ondo to 91 percent in Sokoto. Rural poverty, at 72 percent, is nearly double the urban rate of 42 percent. Roughly 86 million of the poor live in the North. Every dimension the index measures is, in Nigeria’s constitutional design, substantially a state and local government responsibility. Development is a subnational variable. The index is a scorecard of subnational government.

That scorecard makes the new fiscal numbers hard to ignore. According to the monthly disbursement reports of the Office of the Accountant-General of the Federation, combined state and local government allocations rose from ₦5.14 trillion in 2022, the last full year before the reforms, to ₦13.22 trillion in 2025, an increase of 157 percent. Lagos moved from ₦307 billion to ₦996 billion, Kano from ₦204 billion to ₦561 billion, Katsina from ₦148 billion to ₦406 billion, Jigawa from ₦132 billion to ₦352 billion, and Enugu from ₦105 billion to ₦275 billion. No state’s 2025 allocation was less than roughly double its 2022 level. The money to confront development has arrived where development is decided. The question is what states should do with it.

The scale of that question becomes clearer in the cumulative figures. States and local governments received ₦29.04 trillion between 2023 and 2025, against ₦17.01 trillion in the four years before an extra ₦12.03 trillion, averaging ₦334 billion per state. History, however, counsels sobriety. Past oil booms also swelled transfers. The Excess Crude Account was drawn down rather than saved. When prices collapsed, a majority of states fell into salary arrears by 2015 and needed federal bailouts. 2020 repeated the lesson. Allocation booms are not new in Nigeria. Converting one into development would be.

What states are doing with the present boom is therefore the place to start, because the prevailing pattern is the problem. Payrolls and appointments have expanded toward the new revenue. Overheads have grown with income rather than need. Capital budgets announced in January are only partly executed by December, and much of what is built is chosen for visibility rather than effect. Local government allocations, which reached ₦11.45 trillion over the three years, still pass through state-controlled structures despite the Supreme Court’s July 2024 judgment granting the 774 councils financial autonomy. The tier responsible for the services the poverty index measures remains starved. Clearing arrears, paying the ₦70,000 minimum wage and retiring expensive debt are defensible. They are stabilisation, not development. Bayelsa is the standing warning: among the highest per capita recipients for two decades, and still among the highest poverty rates. Money can reach a treasury for twenty years without reaching the deprivations.

It fails for a reason that is now familiar. When 70 to 80 percent of a budget is already committed to salaries, overheads and debt service, a doubled allocation disappears into a larger government without a single new clinic. Withheld council funds leave primary services unfunded. And clinics and roads only work if a state has a delivery system capable of building them, staffing them and keeping them open. The fast variables that predict development; capital execution, enrolment, health staffing, are visible now. In most states they are not moving.

If that is the trap, the way out is to treat the surge as investment in two things that reinforce each other: the deprivations the index measures, and the assets that generate income and jobs at home. A state receiving ₦400 billion a year that published a capital floor of at least 30 percent, and spent it against a ward-by-ward map of missing clinics, classrooms, water and roads, would be putting ₦120 billion a year where the scorecard is actually compiled. Enugu is already building smart schools and primary healthcare centres that way, a drive UNICEF has called a turning point. Buildings alone, though, do not teach or treat. The same money has to recruit and train teachers, put health workers and drugs in the new centres, feed children as nutrition policy, and run enrolment campaigns where millions remain out of school. The useful distinction is not capital versus recurrent. It is productive spending versus administrative expansion.

The states that understood this earliest did not stop at social infrastructure. They put money into what their territory could produce. Lagos built the Imota rice mill, the largest in Africa, with capacity for 2.5 million 50kg bags a year, and tied a food economy to Nigerian farms; on NBS figures its internally generated revenue nearly doubled from ₦647 billion in 2019 to ₦1.26 trillion in 2024. Kebbi built around its paddy advantage, including the partnership that put jointly branded rice on Lagos shelves, and its own revenue more than doubled from about ₦7 billion to ₦17 billion. Ogun cultivated the industrial corridors along the Lagos border, and revenue rose from ₦81 billion to ₦195 billion. Jigawa’s rural feeder roads underpin commercial agriculture, and revenue grew almost fivefold, from ₦13 billion to ₦63 billion. None of this required a coastline or oil. Each state funded what private producers needed mills, roads, irrigation, power, market access and was paid twice: first in jobs and incomes, later in the tax base from which every state finances itself.

Even that local economy will stall if the forgotten tier stays empty. Roughly 40 percent of Federation Account flows belong to local governments, and the services that determine the poverty index are constitutionally theirs. Direct crediting and published council-level reporting, as the Supreme Court required, is therefore not a legal footnote. A state that keeps sitting on council money is hollowing out its own scorecard.

And none of the spending on wards, mills, roads or councils will survive contact with the old machinery unless the machinery itself changes. Delivery units with published pipelines, competitive procurement, maintenance budgets attached to every asset, and quarterly public reporting of receipts, spending and project status are how a capital floor becomes clinics that function. Payroll should not grow as fast as revenue. A buffer should be built, because the Federation Account is volatile and 2015 and 2020 have already taught that lesson. The failure mode of past booms was prestige capital airports without airlines. The test for every project is the same: does it expand the state’s economy or the capabilities of its people, or merely decorate the state?

Those tests are no longer theoretical. The examples are already on the ground: schools and clinics in Enugu, a food economy in Lagos and Kebbi, industrial corridors in Ogun, rural roads in Jigawa. The surge will not last forever. Part of it rides on an exchange rate and an oil price no governor controls. What each governor controls is what the money becomes. In 2030, the question in every state capital will not be how much came in. It will be whether the indices moved: how many children entered and stayed in school, how many clinics functioned, and how far poverty fell from 91 percent in the states where it stood highest.

*Intellect Plus Advisory Ltd is an Abuja-based consultancy firm that leverages deep expertise in economics and public policy to provide comprehensive insights into complex economic landscapes, market trends, and vital policy frameworks. All FAAC revenue and disbursement figures are drawn from the monthly reports of the Office of the Accountant-General of the Federation (OAGF); poverty figures from the National Bureau of Statistics’ Multidimensional Poverty Index; and international comparisons from the IMF and the World Bank.
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