A new policy brief by the Nigerian Economic Summit Group (NESG) said rising fiscal deficits and heavy dependence on federal allocations continue to weaken the financial position of subnational governments.
Titled, ‘From Dependence to Resilience: Improving Subnational Fiscal Position in Nigeria,” the document was released yesterday by the NESG and authored by NESG Non-Resident Senior Fellow, Adesoji Farayibi.
It warned that despite the increase in Federation Account Allocation Committee (FAAC) allocations, the fiscal position of most states remains fragile. It notes that over 30 states still derive more than 70 per cent of their revenues from FAAC.
Only Lagos and Ogun states demonstrate substantial internally generated revenue (IGR) capacity, while Bayelsa, Taraba and Yobe rank among the most heavily reliant on federal transfers.
“Subnational governments play a critical role in Nigeria’s governance structure. However, rising fiscal deficits driven by structural and macroeconomic pressures threaten states’ capacity to mobilise their own resources. This fiscal structure incentivises dependence rather than self-sufficiency,” it stated.
It argued that increased FAAC inflows have not translated into stronger fiscal independence at the state level. Instead, weak revenue diversification and limited internal revenue mobilisation continue to expose many states to fiscal shocks and macroeconomic volatility, Farayibi noted.
