IMPACT OF REVENUE ALLOCATION ON ECONOMIC GROWTH IN NIGERIA

ABSTRACT

This study has examined the impact of government revenue allocation and its impact on economic growth in Nigeria for the period of 21 years (1993-2014) The data used for the study were gotten from the publications of the central Banks of Nigeria, such as the statistical Bulletin. Of various years, Multiple linear regression technique was used for data Analysis. The result indicated that allocations to state and local government has a significant impact on economic growth in Nigeria whereas allocations to federal government was not significant for period under review however revenue allocations for overall does not have any significant impact on economic  growth in Nigeria this could be attributed to high level of corruption and diversion of government funds meant for developmental purposes: It is thus recommended that government officials should invest government funds into a more economic, social and welfare oriented projects which will attract investors, as such boost the economic growth of the country.

 

 

 

 

 

 

 

 

CHAPTER 1

INTRODUCTION

• Background of the study

Nigeria as a nation operates a federal system of government. Federalism refers to the existence in one country of more than one level of government, each with different expenditure responsibility and taxing powers. This shows that fiscal federalism is all about the relationship among the different units if function and tax powers to the constituent units. The existence of imbalance between functions and resource base makes it expedient for the higher level of government to transfer revenue to the lower level. This is referred to as “efficiency transfer or balancing’’.

The sharing of funds from the federation accounts is one of the contentions and sensitive issues in the Nigeria policy; this has remained a central element of inter-fiscal relations. In Nigeria, revenue allocation is taken as the distribution of national revenue among the various tiers of government in the federalism. This issue is so important that in some other countries, it has become a national question (Mbanefor, 1993 and Emenuga, 1993). For instance, Kayoed(1993) observed that a satisfactory solution to the question.

This shows that in any nation, its stability as a political entity depends to a large extent on revenue allocation. A democratically elected government can be sustained if only there is an appropriate distribution of nation’s revenue among state government themselves.

• Statement of the Problem

The return of democratic government is expected to lead to the practice of a more balanced system of fiscal federalism, more transparency, fiscal accountability and more devaluation of power to lower unit of government and hence more  fiscal decentralization  while a greater  decentralization would no doubt contribute to greater grassroots participation, generate more local development, increase efficiency and equity, create employment opportunities and promote poverty alleviation, it must not be done in such a way as to conflict with the national objective or unduly complicate it.

The change in the internal geographic structure of the nation as a result of strong and continuous agitation for state creation has led to distortion in the revenue allocation process and this weakened the fabric of federalism. For example, 12 states were created out of four regions in 1967. In 1967, the number of state rose to 36 states with 774 local governments. Till date, we still have 36 states and 774 local governments. Given the associated raising running cost, that is provision of secretariats, staff salaries and allowance, rental and buildings, provision of utilities and increasing outlays or maintained, because of the fact that the economic growth process in Nigeria has not been utilized, it therefore, made Whether revenue allocation formula adopted in the past not to have any meaningful impact on the economic growth in Nigeria. The issue of revenue allocation in Nigeria is a fundamental aspect that enhances promotion of national unity and rapid economic growth. Hence, formula adopted in the past had meaningful impact on the economic growth process in Nigeria.

1.3    Research Questions

The above problem statement thus leads to the following research question

1. What is the impact of government revenue on economic growth in Nigeria?
2. What is the impact of local government revenue on economic growth in Nigeria?

1.4     Objective of the Study

The broad objective of this study is thus to investigate the impact of revenue allocation on economic growth in Nigeria. Thus in achieving this, the following specific objectives are set to be achieved;

1. To access the impact of government revenue on the level of economic growth in Nigeria.
2. To access the impact of local government revenue on the level of economic growth in Nigeria.

1.5      Research Hypothesis₁;  There is no significant impact between government revenue and economic growth in Nigeria.

H₀₂;   There is no significant impact between local government revenue and economic growth in Nigeria.

1.6     Significance of the Study

The study would be beneficial to the following;

1. It will be significant to future researchers like the students.
2. The Government; It will help the government to know the best way of allocating the revenue Accruing from the economy.

• The general public; it will enlighten the general public to understand what

1. Revenue allocation is all about.
2. The recommendations in the study will guide policy makers in formulating policies revenue allocation in Nigeria.

1.7     Scope of the Study

The study shall be conducted within the confinement of the sovereign nation, Nigeria between the periods of  21 years [1993-2014].

1.8     Organization of the Study

The study would be organized in fie chapters, which are structured thus,

Chapter One – Background of the study.

Chapter Two – Review of related literature.

Chapter three – Review of methodogy.

Chapter four – Data presentation and analysis.

Chapter five – Summary of findings, conclusion and recommendations.

1.9     Definition of Terms

1. Revenue Allocation; This can be defined as the distribution of revenue or total income through a business corporation or government structure.
2. Revenue; This can be defined as the amount of money that a company actually receives during Specific period, including discounts and deductions for returned merchandise.

• Economic growth; Is the increase in the standard of living in a nation, it can also be said To be a process whereby, simple, low income national economies are transformed into Modern industrial economies.

1. Investment; Investment is the amount purchased per unit time of goods which are not Consumed but are to be used for future production, example include, railroad or factory Construction.
2. Employment rate; this is the percentage of the working age population [age 15 to 64 in most OECD countries] that are employed.
3. Fiscal federalism; It is concerned with “understanding which function and instrumentsare best centralized and which is best placed in the sphere of decentralized level of government’’.