Fiscal Federalism In Nigeria: Implication For Growth

Nigeria has been a federation before 1963. This was expected to foster speedy growth and development, but military interferences seem to have bedevil this dream. However, an uninterrupted democracy for about 20 years should have produced a significant result, but not much has changed. Many have argued that the need is “true federalism†which includes the re-engineering of the fiscal decentralization structure of the nation, as well as regional control of resources. The debate seems to a call for a paradigm shift from the first-generation theory (FGT) of fiscal federalism to the second generation theory (SGT) of fiscal federalism. This study therefore attempts to empirically assess the state of Nigeria’s fiscal federalism in terms of its impact on economic growth, so as to uphold or refute the claims of the defects in the present status quo. Time series data were employed from different secondary sources. The designed models were estimated using Autoregressive Distributed Lag (ARDL) technique, and the elasticities of the estimated equations showed that fiscal decentralization could actually foster economic growth, but this growth may have been inhibited by corruption, ineffective leadership, unconducive macroeconomic environment as well as other upheavals. The recommendation that Nigeria should consciously make and implement laws that will foster effective, balanced and inclusive fiscal federalism; make, strengthen and implement laws that will be very hostile to corruption and every other forms of unwholesome practices, if it must enjoy the progress that characterize a federal state.