By David Akinmola
Lagos State generated about N1.75 trillion in internally generated revenue (IGR) in 2025, accounting for roughly 34 per cent of the N5.15 trillion collected by Nigeria’s 36 states during the year and further widening the gap between Lagos and most other subnational economies in revenue mobilisation.
The latest data from the National Bureau of Statistics (NBS) showed that the combined IGR of the states rose significantly in 2025, reflecting stronger revenue mobilisation as state governments increasingly seek to reduce their dependence on federal allocations.
Lagos remained the dominant contributor, generating more than one-third of the total revenue collected by all 36 states.
The state’s performance also underscored the concentration of economic activity, businesses, formal employment and taxable transactions in Nigeria’s commercial capital, where the breadth of the tax base provides the government with a significantly larger pool of internally generated revenue than is available to most other states.
The NBS data showed that states continued to rely on taxes as the major source of internally generated revenue, with personal income tax, direct assessment, road taxes, development levies and other tax-related receipts accounting for a substantial portion of collections.
The concentration of IGR in a handful of states, however, highlights the uneven fiscal capacity across Nigeria’s subnational governments.
While Lagos has developed a relatively broad revenue base supported by its large population and concentration of commercial activities, many states continue to operate with narrower tax bases and weaker capacity to generate sufficient revenue internally to finance infrastructure and public services.
The disparity has implications for fiscal sustainability as states face rising expenditure pressures, including salaries, infrastructure, healthcare, education and social services.
For states with low IGR, increased dependence on federal allocations can leave budgets vulnerable to fluctuations in oil revenue, exchange rates and broader economic conditions.
The latest figures therefore reinforce the need for states to expand their productive economies and improve revenue administration rather than relying primarily on higher tax rates or increased federal transfers.
Economists and fiscal policy experts have repeatedly argued that stronger IGR performance should be driven by the expansion of the formal economy, better taxpayer identification, digitalisation of revenue collection and improved compliance, while avoiding excessive taxation that could discourage investment and business activity.
For Lagos, the N1.75 trillion-level revenue performance further cements its position as Nigeria’s largest subnational economy and one of the country’s most important fiscal centres.
The challenge for the state, however, is to ensure that rising revenue translates into improved infrastructure, transport systems, public services and a more competitive business environment.
For the other states, the wide gap in revenue mobilisation highlights the urgency of building sustainable local economies capable of generating jobs, attracting investment and widening the tax base.
With states collectively generating N5.15 trillion internally in 2025, the figures point to a growing role for subnational governments in Nigeria’s fiscal architecture, but also expose the uneven capacity of states to finance development from their own resources.
