Fiscal Decentralisation and Human Development Outcomes Across Nigerian States: A Panel Data Analysis

This study analyses the relationship between fiscal decentralisation and human development outcomes across Nigerian states using panel data covering 36 states and the Federal Capital Territory over the period 2010 to 2022. The debate over whether fiscal decentralisation improves governance outcomes by bringing resource allocation decisions closer to citizens or worsens them by transferring responsibilities to under-capacitated lower-tier governments has been extensively theorised but inadequately resolved in the sub-Saharan African context. Using a fixed-effects panel regression model, the study estimates the impact of changes in states' share of total government revenue, the composition of state own-source revenue, and state expenditure autonomy on the United Nations Development Programme Human Development Index scores disaggregated at the state level. The fiscal federalism theory and the second-generation fiscal federalism framework are applied to derive testable hypotheses about the conditions under which decentralisation produces welfare gains. Findings reveal a heterogeneous relationship between decentralisation and human development across Nigerian states, with fiscal autonomy producing positive outcomes in states with stronger initial governance capacity but negative or null effects in states with weaker institutional environments. States in the South West and South East geopolitical zones benefit more consistently from increased fiscal autonomy than those in the North West and North East, suggesting that minimum governance capacity thresholds condition the effectiveness of decentralisation reforms. Recommendations include capacity-building investments as prerequisites for deepened fiscal decentralisation in low-capacity states. Keywords: fiscal decentralisation, human development, Nigerian states, panel data, fiscal federalism