Fiscal Federalism, Subnational Revenue Autonomy, and Development Outcomes in Nigerian States

This study empirically examines the relationship between subnational revenue autonomy and development outcomes across Nigerian states, addressing a critical gap in Nigeria's fiscal federalism literature. Existing studies have focused predominantly on horizontal revenue allocation formulas while neglecting the role of states' own internally generated revenue (IGR) efforts in determining developmental performance. Using a panel data design covering all 36 states plus the FCT over a ten-year period from 2014 to 2023, the study analyses state-level development indicators including maternal mortality, primary school completion rates, and poverty incidence from the National Bureau of Statistics as dependent variables. IGR as a share of total state revenue, fiscal effort indices, and capital expenditure ratios serve as key independent variables. Fixed effects and random effects regression models, tested against the Hausman specification test, are employed for estimation. The Fiscal Federalism Theory and Wagner's Law of Expanding State Expenditure provide the theoretical anchors. Findings reveal a significant positive relationship between states' fiscal autonomy, measured by IGR share, and development outcomes, particularly in human development indicators. Oil-revenue-dependent states with low IGR effort consistently underperform revenue-diversified states on development indices. The study recommends a new fiscal federalism framework that incentivises IGR mobilisation through performance-based federal transfers and penalises chronic fiscal passivity. Keywords: fiscal federalism, revenue autonomy, internally generated revenue, development outcomes, Nigerian states.