Over the years, Phillips Consulting has established itself as a consistent and credible voice in the assessment of subnational performance through its PSPI reports. The firm deserves recognition for sustaining this effort, refining its methodology, and contributing to an important policy conversation on governance, fiscal responsibility, and development outcomes across states. In a context where comparable, data-driven assessments are limited, the PSPI has provided a valuable platform for benchmarking and peer learning, encouraging states to reflect on their performance and aspire toward improvement.
As states reflect on their rankings and the accompanying public recognition, it is important to remember that the primary value of the PSPI lies not in celebrating positions on the league table, but in using its findings to identify strengths, address areas for improvement, and deepen governance reforms. Like all composite indices, the rankings are best understood as evidence to inform policy and institutional learning rather than as definitive judgments on overall governance performance.
Interpreting the Rankings in Context
As with any composite index, the strength of the PSPI lies not only in its ability to rank, but also in its capacity to support deeper analytical inquiry. Rankings are, by design, a function of methodology. They reflect what is measured, how it is measured, and how different components are weighted. This means that states that perform strongly on the Momentum Index, for instance, may not necessarily represent the most substantively improved governance systems, just as those ranked lower may not be the weakest in institutional terms. Their positions are therefore best understood as outcomes within the boundaries of the current methodological framework, rather than as definitive judgments on governance quality. This provides an opportunity to consider complementary perspectives on the rankings and to explore how additional institutional dimensions and methodological refinements could further enrich the assessment of state performance.
Looking Beyond the Numbers
The 2026 PSPI report offers a compelling narrative of subnational performance, presenting rankings that appear rigorous, data driven, and policy relevant. At face value, the framework suggests a clear hierarchy of states, distinguishing leaders from laggards across fiscal, economic, and governance dimensions. However, a deeper analytical interrogation provides additional perspectives on the interpretation of the findings. The report measures what is visible, but not always what is fundamental. It captures outcomes, but not the institutional processes that produce those outcomes. Nowhere is this distinction more evident than in its treatment of fiscal discipline, and similar considerations apply across nearly all its indicators.
Fiscal Discipline Beyond Financial Ratios
Fiscal discipline, as assessed in the report, is primarily measured through financial ratios. These include internally generated revenue performance, expenditure composition, and debt sustainability metrics. While these indicators are well-established in public finance analysis and provide valuable insights into fiscal performance, they offer only a partial perspective on fiscal discipline. Fiscal discipline, in its broader sense, is not merely about balancing numbers. It is also about whether public financial management systems function as intended, whether resources are allocated and used as planned, and whether public spending delivers value for money and sustainable development outcomes.
Budget Credibility: An Important Dimension
Budget credibility represents another important dimension that could further enrich the assessment of fiscal discipline. At the heart of sound public financial management is the extent to which approved budgets are implemented as intended. In many states, there is a persistent gap between approved budgets and actual execution. Revenues are often overestimated, resulting in expenditure plans that are difficult to implement as originally approved. Capital budgets are particularly affected. Large allocations may be made, but releases can be delayed or incomplete, actual utilisation rates may remain low, and projects are frequently rolled over across fiscal years, creating differences between planned and actual budget implementation.
A more comprehensive assessment could therefore incorporate indicators of budget credibility, including the alignment between approved budgets and actual expenditure and revenue outturns, composition variances across sectors and programmes, the timeliness and predictability of budget releases, the accumulation of expenditure arrears, and the extent to which capital projects are completed within the planned fiscal period. These indicators would provide additional insight into whether fiscal plans are translated into actual results and would complement the assessment of fiscal discipline by capturing not only the quality of budget formulation, but also the effectiveness of budget implementation.
Procurement and Value for Money
Procurement systems represent another important dimension that could further enrich the assessment of fiscal discipline. Public expenditure, particularly capital spending, is translated into development outcomes through procurement processes. Fiscal discipline is therefore reflected not only in how much governments spend, but also in how effectively procurement systems convert public resources into quality infrastructure, efficient public services, and sustainable development outcomes.
The effectiveness of public spending depends not only on the volume of expenditure, but also on the integrity, competitiveness, transparency, and efficiency of procurement systems. Weak procurement planning, limited competition, inflated contract values, excessive contract variations, implementation delays, and poor contract management can significantly reduce value for money and undermine development outcomes.
Equally important are transparent procurement processes, the publication of procurement plans and contract awards, the use of electronic procurement portals, compliance with the Open Contracting Data Standard (OCDS), the disclosure of beneficial ownership information where applicable, and the publication of procurement performance and audit reports. These measures strengthen public oversight, enhance competition, and improve accountability.
Consequently, a state may report high capital expenditure and appear fiscally disciplined while delivering infrastructure of limited quality, at excessive cost, or with significant implementation delays. A more comprehensive assessment could therefore incorporate indicators relating to procurement planning, procurement integrity, competitive tendering, procurement transparency, digital procurement systems, contract management, implementation performance, value for money, and open contracting data. These dimensions would complement financial indicators by linking public expenditure to the quality, efficiency, transparency, and sustainability of the outcomes it produces.
Public Investment Management
Public Investment Management (PIM) represents another important dimension that could further strengthen the assessment of fiscal discipline. Fiscal discipline is reflected not only in how efficiently projects are procured, but also in whether the right projects are selected, prioritised, financed, implemented, and maintained. Effective public investment therefore depends on sound project appraisal, alignment with development priorities, and robust implementation and monitoring systems.
A more comprehensive assessment could incorporate indicators relating to project appraisal and selection, alignment between capital projects and development plans, project completion rates, cost and time overruns, post-completion evaluations, and asset maintenance. These dimensions would complement financial indicators by recognising that fiscal discipline is reflected not only in prudent financial management, but also in the ability of governments to translate public investment into sustainable development outcomes.
Cash Management and Treasury Efficiency
Cash management practices also merit consideration in the assessment of fiscal discipline. Fragmented treasury systems, incomplete implementation of Treasury Single Accounts, and weak cash forecasting can lead to situations where governments borrow while idle funds remain in multiple accounts. Such practices increase financing costs and reduce the efficiency of public resource management. While these institutional processes may not be directly reflected in aggregate fiscal ratios, they provide important context for interpreting the quality of fiscal discipline and represent dimensions that could enrich its assessment.
Looking Beyond Internally Generated Revenue
The same depth of analysis also highlights important considerations in the revenue mobilisation indicators. Internally generated revenue is treated as a proxy for fiscal strength, although the processes through which that revenue is generated are not directly reflected in the index. In many states, revenue systems are characterised by fragmentation, reliance on informal collection agents, and multiple overlapping levies. These practices may impose significant burdens on businesses and households, particularly in the informal sector. They may increase short-term collections, while also affecting economic efficiency and taxpayer trust. A more comprehensive assessment could also consider the structure of the tax system, the efficiency of administration, the cost of collection, and the degree of automation and transparency.
Debt Sustainability Beyond Headline Ratios
Debt sustainability, as measured in the report, is similarly influenced by its reliance on headline ratios. While debt-to-revenue or debt-per-capita metrics provide useful signals, they do not fully capture the purpose or quality of borrowing. Fiscal discipline in debt management is not about minimising debt, but about ensuring that borrowing is aligned with productive investment. This requires robust project appraisal systems, clear links between borrowing and asset creation, and medium-term debt strategies. In the absence of these elements, low debt levels may reflect underinvestment rather than prudence, while higher debt levels may be justified by growth-enhancing projects. These considerations provide additional context for interpreting debt sustainability alongside the reported indicators.
Beyond Capital Spending: Assessing the Quality and Impact of Public Expenditure
Expenditure patterns, particularly the emphasis on capital expenditure, introduce another important dimension of interpretation. The report places considerable emphasis on states that allocate a larger share of their budgets to capital projects. Nevertheless, the effectiveness of public spending depends not only on its classification, but also on its impact. Recurrent expenditure, often viewed less favourably, funds essential services such as healthcare, education, and the maintenance of infrastructure. Underfunding these areas in pursuit of higher capital ratios can affect service delivery. Moreover, capital expenditure is not inherently synonymous with productive investment. A fuller understanding of performance would also consider project selection, execution, and outcomes alongside expenditure levels.
Transparency Extends Beyond Formal Compliance
Transparency and accountability indicators provide valuable insight into governance processes, but they are necessarily focused on measurable aspects of compliance. The existence of audited financial statements or published reports provides evidence of transparency. However, the quality, timeliness, and impact of these disclosures may require additional consideration. Audit reports may be delayed, recommendations may not be implemented, and legislative oversight may be weak. Citizens may have limited access to information or lack the capacity to use it effectively. In such contexts, formal compliance represents an important step towards, but may not fully reflect, substantive accountability.
Data Quality, Transparency, and the Interpretation of Performance Rankings
Across all these dimensions, the reliability of data emerges as a critical consideration. The report relies heavily on officially reported figures, assuming a level of consistency and accuracy across states. States with stronger reporting systems and greater transparency may disclose more complete fiscal information, including liabilities and arrears, which can affect their rankings. Conversely, states with weaker reporting systems may appear to perform more favourably where information is less complete. This suggests that differences in reporting practices may influence comparative rankings alongside actual performance.
Structural Advantages versus Governance Performance
Economic activity indicators introduce another layer of complexity. States with larger economies and more diversified productive bases tend to perform better in the rankings. While this reflects real differences, it also highlights the importance of attribution. Economic outcomes are shaped by structural factors such as geography, resource endowments, and historical investment patterns. Where these outcomes are incorporated into a performance index, careful interpretation is needed to distinguish the influence of structural advantages from that of governance quality. This perspective can help provide a fuller understanding of the drivers of performance and strengthen the usefulness of the rankings for policy reform.
Interpreting the Momentum Index with Caution
The Momentum Index represents an important innovation by focusing on changes over time rather than static rankings. However, short-term improvements may reflect external factors, such as increases in federal allocations or favourable macroeconomic conditions, alongside deliberate policy reforms. Without accounting for these influences, it may be difficult to distinguish the contribution of governance reforms from broader contextual factors. Moreover, the sustainability of observed improvements often becomes evident only over time, particularly where reforms are not yet embedded in institutional practice.
The aggregation of multiple indicators into a composite index further complicates interpretation. Decisions on weighting, normalisation, and aggregation inevitably influence rankings, yet these methodological choices are not always apparent to readers. Consequently, rankings should be understood within the boundaries of the methodology, rather than as definitive measures of governance performance.
More broadly, the PSPI reflects a common challenge in governance measurement. It necessarily emphasises indicators that can be measured consistently across states, while deeper institutional dimensions are less readily captured. Financial ratios and reported outputs therefore receive greater prominence than factors such as institutional capacity, governance processes, and implementation quality. As a result, the index is more effective at describing performance differences than explaining the institutional factors that drive them.
These observations do not diminish the value of the PSPI. Rather, they recognise the practical constraints faced by all composite indices, including data availability, comparability, transparency of calculation, and replicability. Many institutional dimensions highlighted in this analysis, such as procurement integrity, budget execution quality, value-for-money assessments, and the implementation of audit recommendations, remain difficult to measure consistently across states using publicly available data.
The challenge, therefore, is not simply to expand the number of indicators, but to strengthen the measurement framework while preserving comparability and progressively incorporating deeper institutional dimensions. Viewed in this light, the observations presented here are intended to complement the PSPI by contributing to its continued evolution and, ultimately, to stronger governance measurement, better public policy, and improved development outcomes in Nigeria.
Towards a More Comprehensive Governance Assessment Framework
A comprehensive approach to performance measurement could integrate quantitative indicators with qualitative assessments, incorporate measures of institutional strength, and adjust for structural differences across states. It could place greater emphasis on budget credibility, procurement integrity, expenditure efficiency, and the link between fiscal decisions and service delivery outcomes. It could also recognise that governance is not only about numbers, but also about systems, incentives, and behaviours.
Ultimately, the path forward lies not in contesting rankings, but in deepening reforms. States must continue to strengthen governance systems through comprehensive institutional transformation. This includes strengthening budget realism and execution, reforming procurement systems to ensure transparency and value for money, improving cash and debt management practices, and building robust institutions for accountability and citizen engagement. The perspectives and counterfactuals highlighted in this analysis are intended to complement existing performance assessments by pointing toward a more complete and practical reform agenda that addresses the underlying drivers of performance alongside the outcomes they produce.
It is also important to recognise that the current momentum rankings, while useful within their methodological boundaries, do not fully capture the depth or sustainability of reform efforts. A state that appears to be improving rapidly may be benefiting from short-term fiscal or macroeconomic shifts, rather than embedded institutional change. Conversely, a state that ranks lower may be undertaking more difficult, long-term reforms whose results are not yet visible in the data. This reinforces the need to interpret rankings with nuance, appreciating both the insights they provide and the methodological context within which they should be understood.
Strengthening Institutions, Not Just Rankings
For policymakers, the real opportunity lies in using the PSPI not merely as a scoreboard, but as a diagnostic tool for identifying institutional strengths, weaknesses, and reform priorities. The emphasis should be on strengthening the systems that underpin credible budgeting, efficient procurement, fiscal discipline, and accountable governance, allowing improvements in rankings to emerge as a natural consequence rather than the primary objective. These institutional foundations are essential for sustainable development and require deliberate, consistent, and often politically challenging reforms.
This perspective also suggests that the PSPI should be understood as an evolving framework. Like most composite governance indices, its primary value lies in creating a structured basis for comparison, stimulating policy debate, and encouraging states to pay greater attention to fiscal and governance outcomes. The next stage in its evolution is to deepen the framework so that it captures not only reported fiscal performance, but also the institutional mechanisms that determine whether budgets are credible, procurement is competitive, spending is efficient, and citizens experience tangible improvements in public services.
Conclusion: From Metrics to Meaningful Governance
In the end, the true measure of performance is not where a state ranks today, but how effectively it builds institutions that can sustain development over time. A grounded approach to governance reform would focus on aligning fiscal discipline with budget credibility, linking expenditure to measurable outcomes, embedding transparency into everyday processes, and enabling citizens to play a meaningful role in holding governments accountable. By doing so, states can move beyond the optics of performance, shifting the focus from rankings to realities and from metrics to the institutional mechanisms that deliver tangible improvements in service delivery and development outcomes.
By placing rankings within their broader governance context, this analysis underscores a central point. Sustainable progress will not be achieved through improved rankings alone, but through deeper, more coherent governance reforms that reflect the full complexity of public financial management and institutional performance in Nigeria.
