A vegetable vendor at Jos Market, Nigeria. Credit: Daniel Amao / World Bank.
Under Nigeria’s federal arrangement, states enjoy considerable political autonomy but rely heavily on their constitutional share of oil and non-oil revenues collected by the federation. This has long had perverse effects of limited accountability for their use of public resources and little incentives to strengthen systems. The commodity crash in 2015 revealed the precarious state of fiscal governance in states, leading to the World Bank-supported States Fiscal Transparency, Accountability and Sustainability (SFTAS) Program for Results (2018-2022), which channeled $1.5 billion in performance-based grants to Nigeria’s 36 states, to incentivize harmonized practices for fiscal governance. In a new report, we reflect on the reform trajectories of the states and the factors that shape whether - and how - fiscal governance reforms take root.
Achievements and Limitations
Measured by the program results, SFTAS performance exceeded expectations, establishing the basics of sound fiscal management from a low baseline. Key results include:
- Fiscal Transparency and Accountability: All 36 states published budgets and audited financial statements; nearly all publish budget implementation reports, citizen budgets and citizen accountability reports; 24 states enacted laws granting audit offices financial and operational autonomy.
- Domestic Resource Mobilization: Average IGR increased nominally from 20 to 30% ; 29 states adopted consolidate revenue codes; 17 states increased TSA coverage to 80% of state finances.
- Expenditure Efficiency: 33 states passed procurement laws establishing autonomous agencies; half published contract data and adopted e-procurement; nearly all states linked payrolls to biometrics and Bank Verification Numbers.
- Debt Management: 35 states passed debt management legislation; all states are now publishing annual debt sustainability analyses.
While beyond the ambition of the Program, we examined the extent to which these reforms are succeeding in curbing fiscal mismanagement and promoting accountability. The evidence shows that there is still a long way to go. Common challenges include: poor quality of fiscal data; lack of budget credibility with politically inflated budgets; limited utilization of fiscal data by civil society; limited functionality of the TSA; use of direct contracting in procurement; and failure to act on debt data. SFTAS did not expect uniform reform adoption – and results indeed show wide variations across states.
What shapes reform trajectories? Five takeaways
1. Financial incentives work
Performance-based grants clearly motivated reforms. States with lower IGR per capita were more responsive to financial incentives; oil-producing states - cushioned by higher revenues - were slower to embrace reforms. But financial incentives are only one variable in the political calculus governors make. The remaining factors - political, institutional, and normative - often weigh just as heavily.
Lower IGR per capita and better performance under SFTAS are correlated
2. While fiscal governance is inherently political, politics play out in different ways
SFTAS reaffirmed a core truth: fiscal governance reforms shift power. Credible budgets, audit independence, transparent procurement or centralizing revenue collections reduce discretion and constrain patronage networks. In clientelist environments, transparency and accountability reforms rarely deliver immediate electoral payoffs. Instead, budgets are used to signal ambition or to appease constituencies, undermining fiscal credibility.
SFTAS helped alter these political dynamics in subtle ways. Budget officials gained tools - such as medium-term expenditure frameworks - to limit politically motivated spending. The Program fostered peer learning and competition: norms spread across states and political party networks, and public rankings increased the political costs of falling behind. As one interviewee noted: “It’s one thing to be incompetent and people don’t know. It’s another when every other state is doing something and you are not.”
3. Vested interests are the hardest nut to crack
From networks of patronage and rent-seeking to limited accountability for the misuse of public funds, vested interests create perverse incentives. In practice, this meant that some states complied with the letter of SFTAS requirements while evading their spirit to preserve discretion and rents. Yet, the Program also managed to move the needle on select reforms. Procurement illustrates this tension: e-procurement disciplined procurement processes, helped improve transparency, and eroded contract inflation in some cases; yet, politically connected firms continued to secure large awards, often through non-competitive processes.
4. Structured accountability takes time to emerge
Fiscal transparency improved rapidly, but fiscal accountability remains a long-term endeavor. Weak legislatures, limited civic capacity, and dominant party systems constrain oversight. Many budget consultations were symbolic, and many audit offices remained underfunded despite new legal provisions on their autonomy.
Yet, in states with active civil society and media, open contracting portals were used to investigate suspicious contracts, catalyzing public debate and scrutiny. These openings may be modest, but they mark important steps toward more robust accountability ecosystems.
5. Bureaucratic processes and norms matter
A subtle but important lesson from SFTAS is that reforms generate “bureaucratic stickiness.” Repeated use of budget templates, reporting cycles, and data processes created new habits within the civil service - habits that persist even when political commitment wavers.
Availability of fiscal data increased fiscal legibility and created spillovers: once states learned to collect and clean data, additional reforms became easier to adopt. These incremental shifts in norms and routines are often invisible but foundational for lasting institutional change.
Navigating the messy middle
Nigeria’s experience underscores that fiscal governance reform is a process of navigating the “messy middle”: a terrain shaped by political constraints, entrenched interests, and uneven institutional capacity. There are no shortcuts. But progress is possible when financial incentives align, bureaucratic norms take root, and even partial accountability loops begin to form.
*******
Join the Conversation