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Fiscal Federalism and Economic Development of Nigeria

Joshua, Ngozi Gloria, Prof. Anichebe A.S, Ven. Prof. Onuora, J.K.J

Abstract

The study examined the effect of fiscal federalism on the economic development of Nigeria. The specific objective was to ascertain the effect of federal government’s allocation, state government’s allocation and local government’s allocation on the human development index of Nigeria. This study adopts an ex-post facto research design. Data for this study were collected from secondary sources from the Central Bank of Nigerian statistical bulletin, United Nations Development Programme, and the World Bank over 23 years, spanning 2001-2023. Descriptive statistics was used to summarize the key attributes of the data. For the inferential analysis, robust least squares (RLS) regression analysis was employed to test the hypotheses. The study found that: federal government’s allocation has a significant negative effect on the Human Development Index of Nigeria (b = -0.336342; p-value = 0.0000); state government's allocation has a significant positive effect on the Human Development Index of Nigeria (b = 0.237068; p-value = 0.0000); local government’s allocation has a significant positive effect on the Human Development Index of Nigeria (b = 0.140901; p-value = 0.0000). In conclusion, achieving inclusive and equitable economic development requires reforms in the Nigerian fiscal federalism system to ensure resources are distributed fairly, governance is transparent, and regions can develop their economies in line with their unique needs and potentials. The study recommends that the Federal Government should prioritize improving the efficiency and transparency of its resource allocation processes by implementing stricter oversight mechanisms and ensure that allocations are used effectively at the grassroots level, rather than being centralized in a way that hinders local development.

References

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