Internally Generated Revenue and Gross Domestic Product of Ogun State, Nigeria

The study examined the impact of Internally Generated Revenue on the Gross Domestic Product (GDP) using Ogun state, Nigeria as a case study. The study adopted an ex-post facto research design, and secondary data from published financial statements of Ogun State Government was used subjected to statistical evaluation to investigate the research questions. The published account of Ogun State Government was selected as the case study with the period of 10 years spanning from 2000 – 2019. The population of the study was the entire 48 (forty-eight) Ministries, Departments and Agencies of Ogun State Government. The Autoregressive Distributed Lag (ARDL) model and Granger causality tests were employed to assess both long-run and short-run relationships. The research focused on three principal theories: the Theory of Fiscal Decentralization, which emphasizes the role of subnational fiscal autonomy; the Endogenous Economic Growth Theory, which highlights the importance of internal policies and investments in human capital and innovation; and Wagner’s Theory, which posits an expanding public sector accompanying economic growth. Key findings indicated that IGR has a statistically insignificant long-run effect on Gross Domestic Product (GDP) and unemployment in Ogun State, though it exhibits a significant positive relationship with inflation. In contrast, Federal Account Allocation Committee (FAAC) transfers were found to have a significant positive impact on GDP but an insignificant effect on inflation and unemployment. The study concluded that while Ogun State has made progress in revenue generation, its IGR has not effectively translated into sustainable economic growth or job creation, largely due to institutional inefficiencies, misallocation of resources, and over-reliance on federal allocations. To enhance fiscal autonomy and economic outcomes, the study recommends strengthening institutional frameworks for IGR mobilization, prioritizing capital expenditures over recurrent spending, aligning revenue strategies with employment-generating sectors, and reducing dependency on FAAC through diversification of revenue sources.