Analysis of the State of States and Local Governments Finance in Nigeria’s Fourth Republic

Abstract

This paper examined the state of finance of sub-nationals in Nigeria. Descriptive statistics was employed to analyze the financial operation and management of States and Local Governments in Nigeria’s fourth republic. The study found Allocation from the Federation Account (AFA) as the major source of revenue to both states and local governments but State Allocation to Local (SAL) was the least source revenue to Local Government in Nigeria. The study also discovered that Internally Generated Revenue (IGR) was the second generator of revenue to the State Governments most especially from 2006 to 2014 but poor source of fund to Local Governments. The study also found that both the State and Local government recurrent expenditure i.e. SRE and LRE (payment of wages and salaries) were slopped upward however, while State Government Capital Expenditure (SCE) was also increasing but below State Government Recurrent Expenditure (SRE), Local Government Capital Expenditure (LCE) was decreasing. Contrary to expectation, the study found that Nigeria’s fourth republic was characterized by increasing in deficit financing among State Governments while insignificant budget surplus was recorded among Local Governments except the years 2000 and 2008. The study therefore, recommended strongly the sustainability of alternative sources of revenue to sub-nationals in Nigeria.

Keywords: State government; local government; finance

JEL Codes: H71; H72; H74