FISCAL FEDERALISM AND POLITICAL ECONOMY IN NIGERIA

Abstract

Generally, no government that can exist without revenue and expenditure function, this study was carried out to investigate the effect of fiscal federalism and political economy in Nigeria. Fiscal federalism is allocation of revenue and expenditure function to different tiers of government. Fiscal federalism helps to ensure micro-economic stability. Political economy has to do with the relationship between the government, state, and local government. The study evaluates how government affects the lives of the citizens. The problem of this study is revenue appropriation, and expenditure profiling in Nigeria. The broad objective of this study was to evaluate the effect of fiscal federalism and political economy in Nigeria. The independent variable of the study was fiscal federalism which was proxies by revenue allocation of federal government, revenue allocation of state government and revenue allocation of local government, dependent variable was political economy and was proxies by recurrent expenditure, Capital Expenditure, and social service. The fourth hypothesis represents the joint effect of fiscal federalism and political economy in Nigeria. Ex-post facto research design was adopted in the study; the population of the study was Two Hundred Million people (estimated number of people used in the study). The data for the study was extracted from the CBN Bulletin from the period 2003 - 2022. The data were analyzed using correlation, regression, and SPSS version 23. From the finding the result shows that revenue allocation of federal government has insignificant effect on recurrent expenditure in Nigeria, while state and local government has significant effect on capital expenditure and social services in Nigeria. The study concluded that the three tiers of government should come together and adhere to the provisions of the constitution. The study recommends that internal financial control mechanism should be strengthened to ensure compliance with financial memoranda (FM).