Fiscal federalism and economic development in Nigeria: An auto-regressive distributed lag approach

• Main Authors: Olabanji Olukayode Ewetan, Oluwatoyin A. Matthew, Abiola A. Babajide, Romanus Osabohien, Ese Urhie
• Format: Article
• Language: English
• Published: Taylor & Francis Group 2020-01-01
• Series: Cogent Social Sciences
• Subjects: development; autoregressive distributed lag method; fiscal decentralization; fiscal federalism; nigeria
• Online Access: http://dx.doi.org/10.1080/23311886.2020.1789370

This study examines the impact of fiscal federalism on economic development in Nigeria for the period 1981–2017 using the auto-regressive distributed lag approach. The data for the study were sourced from various issues of Central Bank of Nigeria Statistical Bulletin and International Country Risk Guide. It was found that revenue decentralization with a coefficient of −2.15 significantly retarded economic development at 5%, while expenditure decentralization with a coefficient of 2.935 significantly increased economic development at 5%. The overall decentralization indicator, captured as simultaneity measure with a coefficient of 4.264 significantly increased economic development at 1%. From the empirical evidence, fiscal federalism will encourage economic development in Nigeria. These findings support and reinforce the need for greater decentralization of fiscal responsibilities to sub-national government. Also, government should enact legislations to improve bureaucratic quality, and implement appropriate security reforms to further strengthen law and order to ensure economic development in Nigeria.