FISCAL FEDERALISM AND MACROECONOMIC STABILITY IN NIGERIA

This study examined the impact of fiscal federalism on macroeconomic stability of Nigeria from 1981 to 2018. Specifically, the study examined the impact of fiscal federalism on economic growth, price stability, and on unemployment. Fiscal federalism has triggered interest of many scholars in view of the believed that a decentralized fiscal system promotes faster economic growth than a centralized system. In view of this proposition, the study sought to empirically examine the position of normative choice theory and market preserving theory of fiscal federalism as they apply to the practice of fiscal federalism in Nigeria. Qualitative as well as quantitative research approach were used for the study. The qualitative approach employed the use of descriptive tools while the quantitative approach employed econometric tools. The fiscal elements were regressed in separate estimation against economic growth rate, price stability and unemployment using ordinary least square estimation technique in logarithm form. The regression results showed that fiscal federalism as practiced in Nigeria has not significantly impacted on macroeconomic stability of Nigeria except that the federal government should be entrusted with the function of stabilizing the economy. In view of the abysmal
performance of fiscal federalism on macroeconomic stability of Nigeria, it was recommended among other things that Nigeria fiscal federalism should be restructured to follow the pre-1966 model so as to enhance even development at the grass root.