Intergovernmental Transfers and Own Revenues of Subnational Governments in Nigeria

Abstract

The paper explores the effect of intergovernmental transfers on the own revenues of subnational governments in Nigeria. This study employs the instrumental variables (IV) model to establish the impact of annual variation in intergovernmental transfers on the own revenues of subnational governments. The study reveals that states depend mainly on transfers from the federal government to run their operations; and transfers to second-level administrative units, states in Nigeria crowd out own revenues. A 1 percent rise in transfers leads to about 0.65 percent reduction in own revenues per capita. Also, the drive for own revenues goes down in the election year.

Intergovernmental Fiscal Transfers and Tax Collection of Indian States: Estimation from Panel Data Models

“…In this context, we found the statistically significant positive sign of a conditional form of transfers that provides a better guidance for states to raise their own tax collection and finance their expenditure responsibilities. Hence, the findings of the study are similar to those of a more recent study by Taiwo (2022) in the sense that transfers exert a negative pressure on state governments, own revenues . However, the study is partially different from, e .g ., that of Dash, Raja, Debnath, and Bhattacharjee (2019) in terms of the components of central transfers .…”

“…Overall, the study draws some conclusions that the share of conditional transfers could enhance own revenue efforts of state governments by considering some policy measures to make a sophisticated transfer system in the country . Recently, Taiwo (2022) empirically tested the relationship between own revenues and intergovernmental transfers at the sub-national level in Nigeria during the period of 2007-13. The findings reveal the negative relationship between transfers and own revenues of the states due to their dependence on central transfers .…”

Intergovernmental Transfers and Local Revenues Again—A Relook at the Ghanaian Local Government Case

“…Empirical studies that have established the crowd-out result include Johnston et al (2000), Mogues and Benin (2012), Taiwo (2020), and Panao (2021). Explaining crowd-outs, Masaki (2018) argued that the hypothesized crowd-out relationship is associated with countries where sound fiscal institutions already exist.…”

“…Consequently, a key research question in the fiscal decentralization literature is whether central government transfers help or undermine revenue performance in local jurisdictions. Two broad categories of findings have been made on this research question; the crowd-in effect of transfers on Own Revenues (OR) of local jurisdictions (Brun and Khdari 2016; Caldeira and Rota-Graziosi 2014; Masaki 2018) and the crowd-out effect of transfers on OR (Mogues and Benin 2012; Panao 2021; Taiwo 2020).…”

Análisis de datos aplicados a la evolución de la dependencia de las transferencias intergubernamentales: Un estudio de caso en Colombia

“…On the other hand, in the Colombian case, (CEPAL, 2022) indicate that transfers represent 60% of municipal income. (Taiwo, 2022) finds that Nigerian local government units rely mainly on federal government transfers, in which a 1% increase in transfers leads to a 0.65% reduction in own revenue. In Tanzania, (Masaki, 2018) argues that, in many cases, municipal authorities are ineffective in collecting local taxes due to the fragility of institutional resources and the political costs of enforcing taxes, which motivates the dependence on intergovernmental transfers.…”