Fiscal federalism and economic development of Akwa Ibom State, Nigeria

Purpose: This study examined the relationship between fiscal federalism and economic development in Akwa Ibom State, Nigeria, from 2015 to 2024. Specifically, it assessed the effects of statutory allocation, internally generated revenue (IGR), 13% derivation funds, value added tax (VAT) allocation, and excess crude account (ECA) distributions on human development outcomes. Methodology: The study adopted an ex-post facto research design and utilized secondary data obtained from the National Bureau of Statistics (NBS), Akwa Ibom State Budget Office, Federal Account Allocation Committee (FAAC), and the United Nations Development Programme (UNDP). Human Development Index (HDI) was used as a proxy for economic development, while fiscal federalism was measured using statutory allocation, IGR, derivation allocation, VAT allocation, and ECA allocation. Data were analyzed using descriptive statistics and multiple linear regression techniques. Results and Conclusion: The findings revealed that fiscal federalism significantly explained variations in HDI, with an R² value of 0.990 and an F-statistic of 73.17 (p < 0.05). Internally Generated Revenue (IGR) exhibited the strongest positive influence on HDI, while statutory allocation, derivation funds, VAT allocation, and ECA allocation showed insignificant effects. The study concludes that fiscal federalism alone does not guarantee sustainable economic development; rather, effective fiscal management and revenue diversification are critical for improving human development outcomes. Findings: The findings imply that excessive dependence on federal allocations may limit development gains, whereas strengthening internally generated revenue and improving fiscal accountability can enhance sustainable human development in Akwa Ibom State.