Effect of Internally Generated Revenue on Budget Implementation in Ekiti State

Abstract

The study examined the effect of internally generated revenue on budget implementation in Ekiti State. Specifically the study analyzed trends of components of internally generated revenue in Ekiti state including taxes, fines & fees, licenses, earnings and sales, interest and dividend, evaluated the relative impact of internally generated revenue components on budget implementation, and also analyzed the causal relationship between internally generated revenue components and budget implementation in Ekiti state. The study made use of time series secondary data sourced from the annual budget of Ekiti state for a period of ten years spanning form 2007 to 2016. Data collated were analyzed with trend analysis, descriptive analyzes, correlation analysis, ordinary least square regression analysis and granger causality analysis. Result revealed that components of internally generated revenue in Ekiti State has increased considerably over the last ten years, relative impact of taxes on expenditure implementation stood at 4.754741(p=0.6232 > 0.05), relative impact of fines and fees on expenditure implementation stood at 0.354370 (P=0.9624 > 0.05), relative impact of licenses on expenditure implementation stood at 1.312830 (p=0.8427 > 0.05), relative impact of earnings and sales on expenditure implementation stood at 0.166495 (p=0.9877 > 0.05), relative impact of interest and dividend on expenditure implementation stood at 2.478020(p=0.7849 > 0.05), and that there is no causal relationship between components of internally generated revenue and expenditure implementation in Ekiti state. It was concluded that though internally generated revenue components identified in the study trended predominantly upwards over the last ten years, their relative impact on the level of budget implementation is not significant. More so the study established that there is no causal relationship between components of internally generated revenue and budget implementation. The study therefore recommended that Ekiti State Government should device a new framework for boosting the level of internally generated revenue in the state, in such a way that potentials and resources lying unused in the state will be harmonize to foster effective and efficient budget implementation. Government in the state should devise an Information Technology driven revenue mobilization mechanisms to ensure that revenue generated from all sources such as taxes, fines & fees, licenses, earnings & sales, interest and dividend are monitored and properly accounted for, also there is need for reduction of external borrowing that can culminate into excessive deduction in the statutory allocation, which could dampen the capacity of sustaining efficient level of budget implementation in the state.