IGR in Nigeria means Internally Generated Revenue. It refers to the money a state government raises from sources within its own territory, excluding federal allocations, grants and loans.

In simple terms, IGR is the revenue a state generates by itself.

This money can come from taxes, fees, fines, licences, permits, earnings from government agencies, road taxes, land charges, market fees and other local revenue sources. The more IGR a state can generate responsibly, the less dependent it becomes on monthly allocations from the Federation Account.

IGR has become an important topic in Nigeria because many states still rely heavily on FAAC allocations to pay salaries, run government offices and fund development projects. When federal revenue falls or oil prices become unstable, states with weak IGR often struggle more.

This article explains what IGR means, the main sources of IGR in Nigerian states, why it matters, which states generate the most, and the challenges affecting internal revenue growth.

Quick Summary

• IGR means Internally Generated Revenue.
• It is revenue generated by a state or local government from within its own jurisdiction.
• IGR excludes FAAC allocations, loans, grants and other external receipts.
• Major sources include PAYE, direct assessment, road taxes, stamp duties, withholding tax and MDA revenue.
• The National Bureau of Statistics reports state IGR under two broad categories: taxes and Ministries, Departments and Agencies revenue.
• Lagos State consistently generates the highest IGR in Nigeria.
• Most Nigerian states still depend heavily on federal allocations.
• Strong IGR can help states fund projects, improve services and reduce overdependence on FAAC.

What Does IGR Mean in Nigeria?

IGR means Internally Generated Revenue.

It is the income that a government raises internally from people, businesses, institutions and economic activities within its area of authority.

For Nigerian states, IGR refers to the money collected by state governments and the Federal Capital Territory from internal sources. It does not include money shared from the Federation Account through FAAC.

The National Bureau of Statistics 2023 IGR report explains that IGR at state level is reported under two major groups: taxes and Ministries, Departments and Agencies revenue.

This distinction is important. A state may receive large federal allocations, but that does not mean it has strong IGR. IGR shows how much money the state can raise by itself from its own economy and administrative systems.

Why IGR Is Important

IGR is important because it shows how financially self-reliant a state is.

A state with strong IGR is better positioned to fund development without waiting completely for federal allocation. It may have more flexibility to invest in roads, schools, hospitals, transport systems, waste management, water projects and business-support programmes.

Strong IGR can help a state:

• Reduce dependence on FAAC allocations
• Pay salaries and pensions more reliably
• Fund capital projects
• Maintain infrastructure
• Improve public services
• Build fiscal resilience
• Respond better to economic shocks
• Support long-term development planning

Weak IGR, on the other hand, means a state may struggle whenever federal allocations decline. This is a major problem in a country where federal revenue is still influenced by oil earnings, exchange rates and national fiscal conditions.

IGR vs FAAC: What Is the Difference?

IGR and FAAC are not the same thing.

The key difference is that IGR comes from inside the state’s own economy and administration, while FAAC is shared from the national pool.

This is why IGR is often used as a measure of fiscal self-reliance. It shows whether a state can raise meaningful revenue from its own tax base and economic activities.

Main Sources of IGR in Nigerian States

The NBS classifies state IGR into two broad categories:

1. Taxes
2. Ministries, Departments and Agencies revenue

1. Taxes

Taxes usually form the largest share of IGR in Nigerian states. In the NBS 2023 IGR report, taxes accounted for about 80% of total IGR nationally.

Common tax sources include:

PAYE

PAYE means Pay As You Earn. It is personal income tax deducted from the salaries of formal-sector workers.

PAYE is often the largest source of tax revenue for states because it is easier to collect from registered employers and salary earners. The NBS reported that PAYE contributed ₦1.24 trillion in 2023, representing 63.83% of total taxes collected.

This explains why states with many formal workers, companies, banks, telecoms, factories and corporate offices tend to perform better in IGR.

Direct Assessment

Direct assessment is tax paid by self-employed people, business owners, artisans, traders, consultants and others who do not earn regular salaries from formal employers.

This is an important area, but it is harder to administer because much of Nigeria’s economy is informal.

Road Taxes

Road taxes include vehicle-related taxes and charges. They may include vehicle registration, road-worthiness charges and other transport-related revenue sources.

Stamp Duties

Stamp duties are taxes on certain legal, financial and business documents. They may apply to agreements, contracts and other formal transactions.

Capital Gains Tax

Capital gains tax applies to profit made from selling certain assets. In practice, it is usually smaller than PAYE and other major tax categories.

Withholding Tax

Withholding tax is deducted at source from certain payments, such as contracts, professional fees, dividends, rents and other taxable payments.

Other Taxes

Other taxes may include additional state-recognised tax categories and some local-government-related revenue where reported.

2. MDA Revenue

MDA revenue refers to money collected by Ministries, Departments and Agencies of government.

This may include:

• Fees
• Fines
• Licences
• Permits
• Charges
• Rent from government property
• Earnings from government enterprises
• Administrative charges
• Service fees
• Miscellaneous revenue

For example, an agency responsible for land administration may generate revenue through land-related fees. A transport agency may generate revenue through permits or vehicle-related charges. A state ministry may collect fees for certain official services.

MDA revenue is important, but it must be transparent. If too many revenues are recorded as “miscellaneous” without clear detail, it becomes harder for citizens to understand where government money is coming from.

Local Government IGR

Local governments also generate IGR, though the amounts are usually much smaller than state IGR.

Local government IGR may come from:

• Market fees
• Motor park fees
• Tenement rates
• Local licences
• Slaughterhouse fees
• Shops and kiosk permits
• Local business permits
• Outdoor advertising charges
• Birth, death and marriage registration fees

The functions of local governments are listed in the Fourth Schedule of the Nigerian Constitution. These functions include markets, motor parks, local roads, refuse disposal, cemeteries, public conveniences and other grassroots services.

However, local government revenue collection is often weak. In many states, local government finances have also been affected by state-level control, joint-account arrangements and limited administrative capacity.

Recent IGR Statistics in Nigeria

Nigeria’s state IGR has grown significantly in recent years, but the growth is uneven.

According to the NBS 2022 IGR report, the 36 states and the FCT generated ₦1.93 trillion in 2022.

In 2023, the NBS 2023 IGR report showed that total IGR rose to ₦2.43 trillion. This represented 26.03% growth from 2022.

For 2024, a report by the Federal Ministry of Information and National Orientation citing the NBS 2024 IGR release stated that Nigeria’s 36 states and FCT generated ₦3.6 trillion, representing 49.7% growth from 2023.

Top IGR States in Nigeria

Lagos State has consistently led Nigeria’s IGR table by a wide margin.

In 2023, NBS reported the top three as:

In 2024, the Federal Ministry of Information report citing NBS figures listed the top five as:

These figures show how concentrated IGR is in a few economically stronger states and urban centres.

Lowest IGR States

In 2023, the NBS listed Taraba, Yobe and Kebbi as the lowest IGR performers, with ₦10.87 billion, ₦11.19 billion and ₦11.74 billion respectively.

For 2024, the Federal Ministry of Information report citing NBS figures listed Yobe, Ebonyi, Kebbi, Taraba and Adamawa among the states with the lowest IGR.

Low IGR does not always mean a state has no economic potential. It may reflect a smaller formal sector, weak tax administration, limited business activity, poor infrastructure, insecurity, low urbanisation or heavy dependence on federal transfers.

Why Lagos Generates the Highest IGR

Lagos generates more IGR than other Nigerian states because of its economic structure.

Some of the factors include:

• Large number of formal-sector workers
• High concentration of companies
• Strong banking, telecoms and professional-services sectors
• Ports and logistics activity
• Large consumer market
• Real estate and construction activity
• Better taxpayer database
• More digital revenue systems
• Higher level of business formalisation
• Stronger state revenue administration

Lagos is not simply collecting more because it has more people. Population helps, but population alone is not enough. What matters more is the size of the formal economy, the number of taxable businesses, the quality of tax administration and the strength of the state’s economic base.

Why Some States Struggle to Grow IGR

Many states struggle to grow IGR because their economies are not sufficiently formalised or diversified.

Common challenges include:

1. Heavy Dependence on FAAC

Many states rely on federal allocations for the majority of their revenue. This makes them vulnerable when national revenue falls.

BudgIT’s 2025 State of States report summary noted that many states still depend heavily on FAAC transfers. According to the summary, 28 states relied on FAAC for at least 55% of their revenue in 2024, while 21 states relied on FAAC for 70% or more.

2. Large Informal Economy

A large part of Nigeria’s economy is informal. Many small businesses, artisans, traders and self-employed workers operate without full registration or proper records.

This makes tax collection difficult. States cannot collect efficiently from people and businesses they cannot properly identify.

3. Weak Taxpayer Databases

Some states do not have accurate records of taxpayers, businesses, properties and revenue sources.

Without a reliable database, revenue agencies may rely on manual collection, estimates or informal agents. This creates room for leakages and harassment.

4. Multiplicity of Taxes and Levies

Businesses often complain about multiple taxes, overlapping charges and levies from different government agencies.

When taxpayers feel overburdened or harassed, compliance may fall. A better system is one that is simple, transparent and predictable.

5. Poor Infrastructure

Infrastructure affects revenue generation. States with poor roads, weak power access, poor land administration, low digital systems and underdeveloped markets often struggle to attract formal businesses.

This is why enforcement alone cannot solve IGR problems. A state must also build an economy that can generate taxable activity.

6. Low Tax Morale

People are more willing to pay taxes when they can see visible public value.

If roads are bad, hospitals are weak, schools are poor and public services are unreliable, citizens may resist taxes because they do not trust that the money will be used well.

7. Revenue Leakages and Corruption

Leakages occur when money collected does not fully enter government accounts. This can happen through manual collection, unofficial agents, weak monitoring and poor accountability.

Digitisation can help reduce this problem, but technology must be supported by strong institutions.

What Drives Higher IGR?

States that perform better in IGR usually have a combination of economic strength and administrative reform.

Important drivers include:

• Formal-sector employment
• Industrial and commercial activity
• Strong revenue boards
• Digital payment systems
• Accurate taxpayer identification
• Better land and property records
• Simple tax-payment procedures
• Reduced use of informal agents
• Infrastructure investment
• Public trust and service delivery
• Stronger enforcement against leakages
• Business-friendly policies

This means a state should not focus only on collecting more money. It must also grow the economy, make compliance easier and show citizens that revenue is being used responsibly.

Can States Increase IGR Without Overburdening Citizens?

Yes. Increasing IGR does not always mean raising tax rates.

States can grow IGR by:

• Expanding the tax base
• Registering more businesses
• Making tax payment easier
• Reducing leakages
• Using technology for collection
• Improving property records
• Encouraging formalisation
• Supporting small businesses to grow
• Reducing illegal levies
• Improving infrastructure
• Building public trust through visible projects

The best approach is not to punish citizens with excessive taxes. The better approach is to build a stronger economy and collect existing taxes more fairly and efficiently.

IGR and Development: What Citizens Should Watch

Higher IGR should lead to better public services, but this does not happen automatically.

Citizens should ask:

• Is the state collecting more revenue?
• Is the revenue being reported clearly?
• Is the state spending more on useful projects?
• Are roads, schools and hospitals improving?
• Are small businesses being overburdened?
• Is tax collection transparent?
• Are citizens getting value for the money collected?

IGR is only useful when it supports development. If revenue rises but service delivery does not improve, citizens have a right to demand accountability.

Common Misconceptions About IGR

Misconception 1: IGR is the same as FAAC

IGR is generated internally by the state. FAAC is shared from the Federation Account. They are not the same.

Misconception 2: High IGR means everyone in the state is rich

High IGR means the government collects more internal revenue. It does not mean every resident is wealthy.

Misconception 3: A large population automatically means high IGR

Population helps, but it is not enough. Formal employment, business activity, infrastructure and tax administration matter more.

Misconception 4: States can increase IGR only by raising taxes

States can improve IGR by reducing leakages, widening the tax base, simplifying payments and growing the economy.

Misconception 5: All state revenue is IGR

State revenue may include IGR, FAAC allocations, VAT share, grants, loans and other receipts. IGR is only the internally generated part.

Frequently Asked Questions

What is the full meaning of IGR?

IGR means Internally Generated Revenue. It is the revenue a government generates from internal sources within its own jurisdiction.

What is IGR in Nigeria?

In Nigeria, IGR usually refers to revenue generated by state governments and the FCT through taxes, fees, licences, fines and MDA revenue. It excludes FAAC allocations.

What are the main sources of IGR?

The main sources are PAYE, direct assessment, road taxes, stamp duties, withholding tax, capital gains tax, other taxes and MDA revenue.

Which state has the highest IGR in Nigeria?

Lagos State consistently records the highest IGR in Nigeria. In 2024, reports citing NBS figures placed Lagos above ₦1.2 trillion.

Why is Lagos IGR higher than other states?

Lagos has a large formal economy, many companies, a strong tax base, ports, real estate activity, financial institutions and stronger revenue collection systems.

Is FAAC part of IGR?

No. FAAC allocation is not part of IGR. FAAC is money shared from the Federation Account, while IGR is generated internally.

Do local governments generate IGR?

Yes. Local governments can generate IGR from markets, motor parks, tenement rates, licences and other local sources, but collection is often weak.

Why do some states have low IGR?

Some states have low IGR because of weak formal-sector activity, poor infrastructure, limited taxpayer databases, low urbanisation, insecurity, weak administration and heavy dependence on FAAC.

Can a state increase IGR without increasing tax rates?

Yes. A state can increase IGR by widening the tax base, reducing leakages, improving digital collection, supporting business growth and making tax compliance easier.

Does high IGR mean better development?

Not automatically. High IGR gives a state more revenue, but development depends on how well the money is managed and spent.

Conclusion

IGR is one of the most important measures of state fiscal strength in Nigeria. It shows how much revenue a state can generate by itself, without relying completely on federal allocations.

The states that perform best usually have stronger formal economies, better infrastructure, larger tax bases and more effective revenue systems. But IGR is not only about collection. It is also about trust, service delivery, economic growth and accountability.

For Nigeria’s states to become more financially resilient, they need to grow IGR in a fair and sustainable way. That means improving tax systems, reducing leakages, supporting businesses, investing in infrastructure and showing citizens that public revenue is used for real development.