Fiscal Decentralization and Economic Growth in Nigeria: A Multivariate Co-Integration Approach

Abstract:

This paper examines the long run and causal relationship between fiscal decentralization and economic growth in Nigeria for the period 1970 to 2012 using time series data. Results from a multivariate VAR model provide evidence of long run relationship between fiscal decentralization and economic growth in Nigeria. The three measures of fiscal decentralization have a positive and significant relationship with economic growth, Granger Causality test reveals long run unidirectional link running from fiscal decentralization to economic growth. The study recommends the need for government to urgently address the constitutional issue of fiscal powers among the three tiers of government to further strengthen the fiscal base of the state and local governments and increase further the level of fiscal decentralization.