Volatility of Internally Generated Revenue and Effects of Its Major Components: A Case of Akwa Ibom State, Nigeria

Abstract

In this work, volatility of Internally Generated Revenue of Akwa Ibom State with the contributory effects of its components was the major interest. Autoregressive Conditional Heteroscedasticity ARCH (1) model adopted revealed volatility in the IGR. This motivated investigation of the components as contributory factors to the volatility. The OLS regression of IGR volatility on the K-components revealed the contribution of each component to the IGR volatility. The F test result showed overall fitness of the regression model. Individual T test placed tax revenue volatility higher than any other component. The volatility in the tax revenue is explained by the inconsistency in the growing trend of the tax revenue. This is attributed to laxities in the revenue generation mechanism, therefore posing challenges to the revenue system. The revenue generation system in the state requires sound leadership in the Board of Internal Revenue, good revenue driven policy, transparent tax revenue consulting and innovative approaches by the labour force for improved revenue system. Government willingness to address the prevailing issues would enhance stability in the revenue generation, therefore, helping to reduce volatility and cope with the challenges of financial planning in Akwa Ibom State.