This study examines the impact of government expenditure on economic development in Ondo State, Nigeria, using internally generated revenue (IGR) as a proxy. It focuses on three sectors: education, health, and agriculture, to assess their relative contributions to state revenue performance. The study employs an ex post facto design using secondary data from 2020 to 2024. Descriptive statistics, correlation analysis, and multiple regression techniques were applied to evaluate the relationship between sectoral expenditures and IGR, and to determine the statistical significance of each sector’s effect. Results show considerable variability in IGR, with education and health receiving consistently higher allocations than agriculture. Correlation analysis reveals positive associations between IGR and all three sectors. Regression analysis indicates that 89.3 percent of IGR variation is jointly explained by the three expenditures, with education showing a statistically significant positive effect, while health and agriculture show positive but borderline effects. Strategic allocation of public funds, particularly prioritising education, can enhance internally generated revenue and support economic development. Policymakers should adopt integrated budgeting to balance sectoral investments, maximise fiscal outcomes, and strengthen human capital development. The study provides state-level empirical evidence on the effectiveness of government spending in Nigeria, highlighting education as the most influential sector in driving revenue performance. It offers actionable recommendations for improving fiscal planning and resource allocation in sub-national governance contexts.