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Is there an “invisible hand” in the formula-based intergovernmental transfers in Nigeria?

Author

Listed:
  • Kayode Taiwo

    (NIPE and University of Minho; Department of Economics, Adekunle Ajasin University, Akungba-Akoko, Nigeria)

  • Linda G. Veiga

    (NIPE and Department of Economics, University of Minho)

Abstract

Intergovernmental transfers are susceptible to the tactical influence of the transfer-giving government notwithstanding the institution of a formula-based system under the control of an independent institutional body. This study explores the arrangement of intergovernmental transfers in Nigeria, where the formula-based system under the control of a constitutionally recognised body is in place, using the data from the year 2007 to the year 2016. The general conclusion from this study does not support equity considerations but rather tactical manipulation in intergovernmental transfers. Results suggest that states with poor fiscal capacity, especially the rural and less developed states, receive lower transfers per capita, contrary to equity considerations. There is evidence that transfers to states under the control of opposition parties and term-limited governors are lower. Additionally, transfers are strategically increased to all states during election periods possibly for the federal government’s political base enlargement and strengthening.

Suggested Citation

  • Kayode Taiwo & Linda G. Veiga, 2020. "Is there an “invisible hand” in the formula-based intergovernmental transfers in Nigeria?," NIPE Working Papers 02/2020, NIPE - Universidade do Minho.
    • Handle: RePEc:nip:nipewp:02/2020
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    References listed on IDEAS

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    More about this item

    Keywords

    Fiscal federalism; Intergovernmental transfer; Political targeting; Panel data; Nigeria.;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts

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