Fiscal Decentralization and Macroeconomic Outcomes in Nigeria

This study examined the fiscal decentralization-economic growth nexus in Nigeria, with the objective of establishing the causal relationship between measures of fiscal decentralization and economic growth covering the period 1981-2019. Employing the autoregressive distributed lag (ARDL) technique of econometrics, the analyses revealed that fiscal decentralization variables employed in the study vis-a-vis the federal government, state government, and local government expenditures have a positive and significant impact on economic growth in Nigeria except for local government expenditure which was not significant at any level. This behavior is adduced to be a function of poor governance, corruption, and other underlying structural challenges at that level. Also, it was observed that while real GDP has a positive and significant impact on private consumption expenditure, its impact on unemployment was not significant at any level. The study therefore concludes that the nature and pattern of growth in Nigeria has not been inclusive. Consequently, it is recommended that fiscal relations governing the different tiers of government be reviewed to meet existing realities while coordinated fiscal policy measures and improved governance will enhance growth and the fiscal space in the country.