Nigeria's States Record Budget Surplus, Marking Sharp Turnaround in Fiscal Performance

Nigeria's 36 states have collectively recorded a budget surplus of ?7.1 trillion in the first half of 2025, marking a significant improvement from a deficit of 1.8% in just two years ago. The sharp turnaround is attributed to the implementation of sweeping federal reforms, including the removal of fuel subsidies, enhanced revenue mobilization, and the repayment of longstanding arrears owed to subnational governments. The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, attributed the fiscal gains to President Bola Tinubu's economic strategy, which prioritizes empowering subnational governments through rule-based revenue sharing, better resource allocation, and stronger governance.

Key Takeaways:

• The collective budget surplus of Nigeria's 36 states in the first half of 2025 is ?7.1 trillion, equivalent to 3.1% of GDP, marking a significant improvement from a deficit of 1.8% two years ago.
• The removal of fuel subsidies has contributed to a savings of up to 5% of GDP annually, which has been redirected to the Federation Account, enabling the federal government to boost allocations to state governments and settle historic debts.
• The improved fiscal position has enabled states to ramp up capital spending, with a large portion of the surplus channeled into infrastructure, health, and education projects.
• The Tinubu administration is implementing Nigeria's most comprehensive tax reform in decades, aiming to increase the tax-to-GDP ratio, digitize revenue collection, and reduce inefficiencies.
• Artificial intelligence and digital tools are being deployed to modernize the country's tax infrastructure, with a focus on increasing internal revenue and reducing subsidies.
• The federal government is prioritizing savings from Federation Account inflows and tightening oversight on public spending, with efforts to streamline excessive allocations to some government institutions.
• Additionally, the government is providing direct support to vulnerable Nigerians, with approximately 8 million citizens receiving digital cash transfers as part of a broader initiative targeting 15 million beneficiaries.

Statistics:

• ?7.1 trillion: The collective budget surplus of Nigeria's 36 states in the first half of 2025
• 3.1%: The percentage of GDP represented by the surplus
• ?2.8 trillion: The combined fiscal balance of the states in the first half of 2023, a deficit of 1.8% of GDP
• 5%: The savings from the removal of fuel subsidies, equivalent to the annual consumption of subsidies prior to their elimination
• ?7 trillion: The collective surplus over ?2.8 trillion, a marked improvement from just two years ago
• 8 million: The number of citizens who have received digital cash transfers as part of a broader initiative targeting 15 million beneficiaries
• 15 million: The total number of beneficiaries targeted by the digital cash transfer initiative

Sources:

• Nigeria's Ministry of Finance and Coordinating Ministry of the Economy (2025)
• Wale Edun, Minister of Finance and Coordinating Minister of the Economy (2025)
• President Bola Tinubu (2025)
• Nigeria's most comprehensive tax reform in decades (2025)
• Artificial Intelligence and digital tools in modernizing Nigeria's tax infrastructure (2025)