Forging new frontiers: Balancing economic realities with developmental aspirations

In 1960, Nigeria began its journey as an independent nation with just three regions. Today, it comprises 36 states—a result of multiple restructuring efforts aimed at fostering national unity, administrative efficiency, and regional development. Each phase of state creation, from General Yakubu Gowon’s initial 12-state structure in 1967 to General Sani Abacha’s final addition of six new states in 1996, was driven by the hope of bringing governance closer to the people. Yet, the question remains: Has the multiplication of states truly delivered economic progress, or has it merely increased administrative head without tangible benefits?

At the heart of this debate lies a delicate balance between ambition and feasibility. Proponents argue that new states can empower marginalised communities, enhance local governance, and unlock economic potential in underdeveloped regions. However, the reality tells a more complex story—many states still struggle with financial sustainability, relying heavily on federal allocations rather than internally generated revenue (IGR). For instance, Lagos State, Nigeria’s economic hub, generated over ₦840 billion in IGR in 2023, while others, like Yobe and Taraba, managed less than ₦15 billion. This stark disparity raises a crucial question: Can newly created states thrive independently, or will they become yet another financial burden on the federation?

Nigeria stands at a crossroads. While state creation can be a tool for inclusive development, it must be driven by sound economic planning rather than political sentiments. The path forward requires a pragmatic approach—one that prioritizes fiscal responsibility, infrastructure readiness, and governance efficiency over mere territorial expansion. Without this, the dream of prosperity through state creation risks becoming yet another unfulfilled promise.

A brief timeline: From three regions to 36 states

At independence in 1960, Nigeria was divided into three regions: Northern, Western, and Eastern. However, ethnic and regional tensions soon exposed the flaws of this structure. The first major shift came in 1967, when General Yakubu Gowon, in response to growing secessionist movements, replaced the regions with 12 states, aiming to decentralise power and reduce ethnic dominance. Over the next decades, successive military governments—Murtala Muhammed (1976), Ibrahim Babangida (1987, 1991), and finally, Sani Abacha (1996)—expanded the number of states, culminating in the current 36-state structure.

Despite these efforts to decentralise power, demands for more states have persisted. Advocates argue that new states will bring governance closer to the people, enhance economic development, and address historical grievances of marginalisation. However, critics caution that more states could increase administrative costs and deepen ethnic divisions rather than resolve them.

In the first week of February, the debate over state creation in Nigeria resurfaced again following the House of Representatives Constitution Review Committee’s proposal to establish 31 new states. This move, which seeks to expand the country’s current structure, reflects long-standing political, economic, and ethnic considerations in Nigeria’s federal system.

Economic feasibility of state creation: A critical analysis

State creation in Nigeria has long been viewed as a means of bringing governance closer to the people, promoting development, and addressing regional disparities. However, beyond political aspirations, the economic feasibility of creating new states remains a significant concern. A data-driven approach reveals stark realities about revenue generation, fiscal sustainability, and infrastructure costs, raising fundamental questions about whether Nigeria can afford additional states.

“While state creation can be a tool for inclusive development, it must be driven by sound economic planning rather than political sentiments.”

Revenue generation capacity: Can new states survive on their own?

The economic viability of any state depends largely on its ability to generate revenue internally. Data from BudgIT highlights the widening fiscal gap among Nigeria’s 36 states. In 2023, Lagos State led the country with an Internally Generated Revenue (IGR) of over ₦840 billion, accounting for more than 30% of the total IGR of all states combined. Conversely, states like Jigawa, Ebonyi, and Sokoto struggled to generate even ₦20 billion, making them almost entirely dependent on federal allocations.

Fig 1: States 2023 IGR growth rate

This disparity underscores a critical challenge: many existing states are financially unsustainable, raising doubts about the viability of new ones. If current states cannot independently fund infrastructure, salaries, and public services, how can newly created ones survive without further fragmenting already limited resources?

Federal allocation dependence: A system on life support

A closer look at state finances reveals that most Nigerian states are heavily reliant on Federation Account Allocation Committee (FAAC) disbursements to function. According to the Budget Office of the Federation, over 70% of states’ budgets are funded by FAAC allocations, derived primarily from oil revenue.

Examples of states struggling with financial sustainability include:

· Osun State, despite its potential in agriculture and tourism, consistently ranks among the most indebted states with a high dependency on federal transfers.

· Bauchi State, with an IGR of approximately ₦12 billion, receives over ₦80 billion annually from FAAC, highlighting its low fiscal autonomy.

· Bayelsa State, though rich in oil resources, spends a disproportionate amount of its revenue on recurrent expenditures, leaving little for capital development.

Creating new states under these conditions would likely increase fiscal dependence rather than promote self-sufficiency. Without a clear strategy for revenue generation beyond FAAC disbursements, newly created states may become financial burdens rather than engines of growth.

Infrastructure & Human Capital Development: The Cost of New States

Establishing a new state requires significant capital investment in governance infrastructure. The costs include:

· Government Institutions—Setting up a new state capital involves constructing a government house, state assembly, ministries, and judiciary buildings.

· Roads & Public Utilities—Expanding road networks, electricity grids, and water supply infrastructure to accommodate the new administrative structures.

· Education & Healthcare—New states must establish universities, polytechnics, hospitals, and primary health centres to meet the needs of their populations.

Using past experiences as a reference, the creation of six new states in 1996 under General Sani Abacha required billions in federal spending. However, decades later, many of these states still lag in infrastructure and struggle with underfunded social services. The cost of creating a new state today would likely exceed ₦500 billion, considering inflation and increased governance expenses.

Economic gains vs. financial burden: A tough balance

State creation in Nigeria must strike a balance between economic sustainability and governance efficiency. While it can enhance political representation and local development, the fiscal realities suggest that many states struggle with financial independence, relying heavily on federal allocations. Creating new states without a solid economic foundation risks increasing administrative burdens rather than fostering growth.

While proponents argue that state creation stimulates local economies and enhances representation, the financial burden often outweighs the benefits. The evidence suggests that instead of creating new states, strengthening existing ones through revenue diversification, infrastructure investment, and governance reforms would be a more sustainable approach.

The data tells a compelling story—many states in Nigeria are not financially viable, and creating more without a sustainable economic plan could deepen fiscal instability. Instead of further fragmentation, policymakers should focus on regional economic cooperation, enhancing state-level revenue generation, and improving governance efficiency.

To ensure sustainable state creation, comprehensive feasibility studies should be conducted to assess revenue potential, infrastructure needs, and governance capacity. Additionally, existing states must improve fiscal responsibility by diversifying revenue sources beyond FAAC allocations. Strengthening regional cooperation and shared development plans can also provide an alternative to fragmentation, allowing states to pool resources for economic growth.

Ultimately, Nigeria needs a pragmatic, data-driven approach to state creation—one that prioritizes financial viability, administrative efficiency, and long-term development over political expediency. Only through careful planning and sound economic policies can state creation contribute to national prosperity rather than strain existing resources. Without these critical reforms, state creation risks becoming an expensive political experiment rather than a pathway to economic prosperity.