Fiscal Decentralisation and Economic Development in Nigeria: The Role of Democratic Institution

Abstract

<p>It is a time series analysis that investigates on the role of democratic institution in the relationship between fiscal decentralisation and economic development in Nigeria. The trend analysis clearly showed that sub-national expenditure is higher than sub-national revenue in Nigeria. The federally allocated expenditures to sub-national is far more than its corresponding allocated revenue in Nigeria and this becomes manifest from the year 1999 when the nation returned to civil rule up till 2014 under the administration of a dominant political party known as the People’s Democratic Party (PDP). Using multiple regression analysis, the empirical results revealed 1% increase in expenditure decentralisation and revenue decentralisation would retard economic performance by 11% and 21% respectively when democratic institution index is included as explanatory variable. The impact of democratic institution in the relationship between fiscal decentralisation and economic performance in Nigeria is however, weak, positive and statistically insignificant in Nigeria as 100% increase in expenditure decentralisation and revenue decentralisation only yield 4% and 5% economic performance respectively in Nigeria. This has resulted to a wide spread level of corruption in Nigeria among bureaucrats and politicians. The study therefore advocates for a strong government institution that will be transparent, accountable and also respect the rule of law for sustainability, effectiveness and timely service delivery.</p>