Budget Transparency and Corruption: Evidence from Sub-National Governments in Nigeria

Budget transparency remains one of the most contested yet consequential dimensions of public financial management, particularly within federal systems where fiscal discretion is distributed across multiple tiers of government. In Nigeria, sub-national governments — comprising 36 states and the Federal Capital Territory — control a substantial share of public expenditure but consistently lag behind global benchmarks for open governance. This study examines the relationship between budget transparency and corruption across Nigerian states over the period 2005–2024, employing a cross-sectional regression framework anchored on the Principal-Agent Theory, Fiscal Federalism Theory, and the Social Contract Theory. Using a constructed Budget Transparency Index (BTI) as the dependent variable and corruption as the primary independent variable, the study incorporates five categories of control variables: demographic factors (population size, education level, urbanisation rate), macroeconomic factors (internally generated revenue, fiscal dependency, inflation), institutional factors (legislative oversight, civil society strength, IPSAS adoption), global factors (aid/grant dependency, trade openness), and infrastructural factors (internet penetration, road density). Results from pooled OLS, fixed-effects, random-effects, and instrumental variables (2SLS) estimations consistently confirm that corruption exerts a statistically significant and negative effect on budget transparency (β = −0.261 to −0.318, p < 0.01). Conversely, education, internally generated revenue, legislative oversight, civil society engagement, IPSAS adoption, and internet penetration are significant positive drivers of transparency. Fiscal dependency significantly suppresses transparency, consistent with the resource curse hypothesis applied to intergovernmental transfers. Structural break tests reveal a meaningful improvement in transparency following the 2015 IPSAS full adoption deadline. The study contributes to the nascent empirical literature on sub-national fiscal governance in developing economies and offers policy-relevant insights for Nigeria's anti-corruption and public financial management reform agenda