Despites huge allocations accruing to the 36 state governments as a result of the removal of fuel subsidies by President Bola Ahmed Tinubu in May 2023, many Nigerians are still groaning under the pains of the action due to increase in the living costs. BENJAMIN SAMSON in this report seeks stakeholders, experts’ views on what governors are doing with the windfalls.

The fuel subsidy removal in May 2023, hailed by economists as a necessary step to restore fiscal sanity, has brought about an unprecedented increase in allocations from the Federation Account Allocation Committee (FAAC) to state governments.

This, much, offers what is said to be a rare opportunity for state governments to reset their fiscal outlooks and invest heavily in social and economic development. Yet, observers have noted regrettably, that the opportunity is being squandered by governors.

Increased allocations

Speaking in an interview with this reporter, an economist and member of the Egmont Group, Dr. Alex Ufedo, said there is a disconnect between the huge sum that governors receive and its impact on the lives of Nigerians.

He said, “The past year has handed state and local governments a fiscal windfall unmatched in recent history. The removal of the petrol subsidies, coupled with the floating of the Naira, has sharply increased the Naira value of monthly allocations from the Federation Account Allocation Committee (FAAC).

“In 2024 alone, the Federation Account Allocation Committee (FAAC) shared N28.78 trillion to the three tiers of the government, a 79 per cent jump from the N16.28 trillion shared in 2023 and more than doubled the N12.36 trillion in 2022.

“For context, N1.681 trillion was disbursed in May 2025 alone, a sharp rise from N976 billion shared in May 2023, reflecting a 72.17 per cent increase. Much of this bonanza went to governors who are squandering once-in-a-generation opportunities to develop their states. Yet, many Nigerians continue to grapple with inflation, poor infrastructure, unpaid salaries, and underfunded schools and hospitals. Many are asking: Where is the impact of all that money?

“For many states, receipts have doubled; for oil-producing states, they have swelled even further through derivation payments. Yet, for most citizens, the windfall has not translated into better roads, functioning clinics, reliable water supply, or schools that can prepare children for the modern economy. Instead, the rising tide of federal transfers appears to have lifted only the political class, not the public. This disconnect demands scrutiny, and accountability, at the sub national level.

“Unprecedented revenues are not an achievement; they are a test of leadership. If these resources are allowed to vanish into patronage networks and white-elephant projects instead of classrooms, clinics, and clean streets, history will remember not the scale of the windfall, but the scale of the betrayal.”

Investments

Simon Samson, an economics lecturer at Baze University and chief economist at ARKK Economics and Data Limited, urged the government to invest in windfalls from subsidy removal instead of wasting it.

He said, “Sharing the subsidy savings instead of saving and investing means depletion of savings; pursuing consumption instead of investment is putting the present ahead of the future. Nigeria appears to be repeating old mistakes, and probably worse. Using these funds as short-term political cash is dangerous. If a domestic or global downturn occurs, then the Nigerians should be prepared for maximum impact.

“Many governors have reverted to familiar patterns of waste and self-indulgence, lavishing public funds on fleets of luxury SUVs, needless travels, grandiose government buildings, and headline-grabbing projects that do little to alleviate the daily struggles of ordinary Nigerians.Daily newspaper subscription

“In some states, new airports and conference centres have sprung up even as rural clinics lack basic medicines and schools remain dilapidated. The much-needed increase in the national minimum wage to N70,000 has been met with resistance, with many states either failing to pay or doing so inconsistently.”

Continuing, Samson said, “Relief programmes designed to cushion the impact of subsidy removal have been poorly coordinated and insufficient, leaving millions to bear the brunt of rising costs.

“To worsen such abysmal misgovernance, 10 states collectively increased their domestic debt by N417.7 billion from N884.9 billion in Q1 2024 to N1.3 trillion in Q1 2025, despite increased FAAC allocation. It is becoming increasingly clear that unless state governors are held accountable and compelled to invest in people, infrastructure, and essential services, the cycle of poverty and underdevelopment will persist, no matter how much money flows into government coffers.|

In her view, a public affairs commentator, and convener of Hub for the Economics of Africa, a non-governmental organisation, Uche Okori, said the funds from the windfalls have indeed been a blessing to governors, but they have not, in any meaningful way, improved the lives of ordinary Nigerians.

She said, “Primarily, the funds should have been redistributed in a manner that would ease the impact of the subsidy removal on Nigerians. This has not been done. Only 10 out of 36 governors have begun paying the N70, 000 minimum wage to civil servants in their states. It follows, therefore, that most civil servants in Nigeria are forced to bear the brunt of inflated costs for everyday goods while surviving on meagre and unrealistic salaries.

“To make matters worse, there is no visible government intervention in health care as citizens pay out-of-pocket for medications. Nigerians in rural areas lack access to qualified medical doctors. The education sector is in shambles; public schools are starved of basic teaching aids, laboratories, libraries and qualified teachers. Roads, both state and federal, are in deplorable conditions, and peasant farmers who produce the bulk of the food Nigerians consume are left on their own to procure inputs at unaffordable prices.”

She said further that, “In essence, Nigerian governors are failing to invest the excess funds in sectors and institutions that would benefit the Nigerian people. Many governors throw vast sums of money into what they consider to be legacy projects; projects that bear their signature and offer opportunities to line their pockets from the public treasury.

“Notable among such vanity projects is the construction or renovation of government houses at exorbitant costs. Other states build fanciful flyovers where they are neither needed nor useful. A rough estimate by experts puts the funds being squandered on government houses and flyovers at about N200 billion. These are the vanity projects that Nigerians can see with their own eyes, but behind the scenes, governors funnel even more money into phantom and fictitious projects that remain invisible to the public.

“Such windfalls should be invested in sovereign wealth funds to cushion future economic crises. Other ways of utilising such funds include subsidising public transportation, improving hospitals, equipping primary health centres and ensuring access to affordable health care.

“The funds could be used to renovate schools, hire qualified teachers and provide learning materials; build and maintain roads, bridges and public transport systems to enhance mobility and commerce; or even upgrade electricity and water supply systems, especially in rural areas. They could be invested in sectors that could create jobs, like public works, mechanised agriculture, feeder roads construction and the like.”

Tackling inflation

However, a lecturer in the Department of Statistics, University of Nigeria, Nsukka, Dr. Charles Iyorha, said inflation and exchange may have chopped off part of the windfalls.

He said, “To be clear, governors and council chairmen face genuine fiscal pressures. The same reforms that have swelled nominal allocations have also triggered inflation, pushing up the costs of cement, diesel, imported medicines, and other essentials for public works.

“Wage bills and pension liabilities consume large portions of state budgets. Debt-servicing, both domestic and external, eats further into fiscal space.

“But these pressures cannot fully explain the absence of visible transformation in most states. Lagos has made headway on rail infrastructure and revenue mobilisation. Borno, under extreme security constraints, has rebuilt schools and clinics in war-torn areas. Yet for every such example, there are multiple states where the extra funds have been absorbed by opaque procurement, inflated contracts, and politically connected consultancies that deliver little.”

Checks and balances

On his part, a legal practitioner, Barrister Ovey Yakubu, lamented the lack of checks and balances in many states. He said this is needed in many states to hold governors accountable.

“Indeed, the bigger obstacle is not fiscal capacity but political incentives. In too many states, legislatures function as extensions of the governor’s office, approving budgets without rigorous scrutiny. Local government autonomy is a constitutional principle in theory but a hollow practice in reality, as governors retain firm control over disbursements to councils. Without independent oversight or citizen pressure, windfalls will continue to disappear into a fog of ‘capacity building’ retreats and administrative overheads,” he said.

He added, “Most governors engage in reckless spending because the arm of government that should keep them in check is either asleep at the wheel or has been hypnotised by the governors themselves. Section 128 empowers the Houses of Assembly to investigate any person, authority, ministry or government department charged with executing or administering laws, especially in the disbursement or management of public funds. Governors fall squarely within this category.

“Section 129 empowers the Assembly to summon witnesses, issue subpoenas and compel the production of documents, while Section 188 provides for impeachment proceedings if corruption or fraud amounts to gross misconduct. Our Houses of Assembly must wake up to their responsibilities; they are the voice of the grassroots and must hold state governors accountable to the people.”

What to do

Speaking on the way out, Dr. Ufedo said, “Breaking this cycle requires reforms on three fronts. First, fiscal transparency must be enforced with real consequences. The publication of FAAC receipts should be matched by open access to detailed state and local expenditure data, project by project, contract by contract. Civil society and the media can only hold leaders to account if the numbers are available and verifiable.

“Second, state-level revenue generation must be more than tokenistic. The over-reliance on Abuja’s allocations leaves states vulnerable to oil price swings and currency shocks. Lagos, Rivers, and Ogun have demonstrated that internally generated revenue can be mobilised without overburdening citizens if linked to visible service delivery. Other states must follow suit or remain trapped in fiscal dependency.”

He also said, “Third, citizens must reframe their political expectations. Too often, voters focus on federal elections while treating state and local polls as secondary contests. In reality, the quality of a community’s school, health centre, or road is determined not by the president but by the governor and council chairman. A citizen movement to demand results from sub-national leaders is not idealism; it is a democratic necessity.

“Nigeria’s fiscal federalism is imperfect, but it does not absolve governors and local officials of their duties. The post-subsidy, post-naira-float environment has altered the arithmetic of state finance. For once, revenue is not the central constraint; political will is.”

In the same vein, Iyorha called on the Nigerian Governors Forum (NGF) to come together and articulate how the excess funds should be applied.

“The body has a think tank capable of studying how such funds are used for the public good in other societies and advising our governors accordingly. The current trend where governors live recklessly, burn public funds on overseas junkets, launder state funds to acquire properties in Abuja, Dubai, and Europe and bask in luxury spells doom for the people,” he said. (Blueprint)