On 1 January 1914 the Protectorate of Northern Nigeria, the Colony and Protectorate of Southern Nigeria, and the Colony of Lagos were combined into a single political and fiscal unit under Sir Frederick Lugard as Governor-General. The amalgamation was driven principally by money, not politics: the Northern Protectorate had run a chronic budget deficit since its creation in 1900 and was sustained by an annual Imperial Treasury subvention of roughly £314,000 (1912). The Southern Protectorate, by contrast, ran consistent surpluses on import and export duties — palm oil, palm kernel, cocoa, groundnuts and tin — collected through the customs houses of Lagos, Forcados, Calabar and Bonny.
The unified colonial budget for 1914 stood at approximately £4.4 million on the revenue side and £4.3 million on the expenditure side. Of this revenue, roughly £2.1 million was collected at Lagos and the southern ports; the Northern Provinces, in their first year as part of a single budget, contributed under £800,000 in domestic revenue (caravan tolls, native court fees, land revenue, and the partial cattle tax) but absorbed over £1.5 million in administrative, military and railway expenditure. The Lagos–Kano railway, completed 17 January 1912, was the physical instrument that made the fiscal transfer mechanical rather than political.
The amalgamation also folded in the 50% Royal Niger Company mineral-royalty obligation (see 1899 entry). It abolished the separate Southern and Northern Treasuries, created a single Nigeria Account at the Bank of British West Africa (precursor to First Bank), and established the practice — never substantially reversed since — of South-to-North fiscal transfers within a single Nigerian budget.