Fiscal Federalism and Economic Development in Nigeria: An Econometric Analysis

Abstract

This study examined the impact of fiscal federalism on economic development in Nigeria over the period 1981 to 2020 using annual time series. Both revenue and expenditure decentralization were used as measures of fiscal federalism. Analytically, the study employed the autoregressive distributed lag approach. The result reveals that in the long run, revenue and expenditure decentralization have a positive and significant impact on economic development in Nigeria, and many scholars have validated this finding. This finding shows that true fiscal federalism is better captured by both subnational revenue and expenditure decentralization. Given the finding, the study suggests that more fiscal power should be devolved to state and local governments in Nigeria through appropriate legislation.