Abstract
The major objective of income distribution to the federal, state and local governments in Nigeria is to achieve economic growth which leads to economic development. This ultimate aim of governance in Nigeria appears not to have been achieved due to alleged corruption and mismanagement of the monthly allocated funds. Thus, this study investigates the effect of revenue apportioned to the three levels of government on economic growth in Nigeria. The study employs annual time series data which cover a period from 1981-2016 and have been collected from CBN Statistical Bulletin, 2016 edition. Ordinary Least Square (OLS) method is used to perform the multi-regression analysis with the aid of e-views version 9. The findings of the study reveal that the federally apportioned revenue to the federal government (FAFG) has a significant positive impact on RGDP while FALG has a robust significant positive impact on RGDP. The result also indicates that FASG has a significant negative influence on RGDP. This leads to a conclusion that mismanagement of funds by the state governments is a cause for concern. Therefore, the study suggests, among others, that revenue sharing formula in the country should be based more on impact of expenditure incurred on executed projects (long term and short term) by each tier of government than on any other parameter to achieve fairness and efficiency in public service delivery at all levels of governance.
Highlights
The federation account is an exceptional account that is required to be maintained by the federation of Nigeria as specified by section 162(1) of the 1999 constitution
The official revenue allocation formula is used to apportion resources from the federation account to the three levels of government in Nigeria (ATSWA, 2009). It is described as a distributable pool account whereby funds are allotted to the federal government, state governments and the local government councils by the Federation Account Allocation Committee on a monthly basis, based on the prevailing revenue sharing formula in the country (Ani & Obara, 2002)
Increases in the budget deficit are found to adversely impact on economic growth (Dhaneshwar, 1997). Scholars that applied this theory in their various studies posit that policy measure such as revenue allocation positively influences economic growth which is reflected in increase in real GDP in the long run (Akanbi & Du Toit, 2011; Dagwom, 2013)
Summary
The federation account is an exceptional account that is required to be maintained by the federation of Nigeria as specified by section 162(1) of the 1999 constitution. In Nigeria, economic growth and development are the underlying reasons for revenue allocation to the three tiers of government from an account called federation account. Derivation allowance is given to the Niger Delta States as a way of compensating them for the environmental degradation and pollution suffered as a result of oil exploration in their area (Omodero, Ekwe & Ihendinihu, 2018) This derivation allowance applies to all States with solid minerals that generate income to the Federal Government (Adangor, 2015). The major aim of the huge revenue allocation is to boost sustainable economic development across the 36 states of the federation including the Federal Capital Territory (FCT) Abuja and the 774 local governments in the country, but the goal is defeated due to corruption and mismanagement of funds
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