Fiscal Federalism and the Determinants of State Internally Generated Revenue (IGR) in Nigeria

This study empirically examines the impact of fiscal federalism on state Internally Generated Revenue (IGR) in Nigeria over the period 1999–2024. The study evaluates how the fiscal instruments such as revenue-sharing arrangements, grants and transfers, sub-national debt levels, and vertical and horizontal revenue allocation formulas affect IGR across Nigerian states with heterogeneous economic structures. Specifically, the study seeks to: (i) assess the impact of revenue-sharing arrangements on state IGR; (ii) examine the effect of grants and transfers on state IGR;. Adopting an ex post facto and analytical research design, the study utilizes secondary data sourced from the National Bureau of Statistics and other official publications. The Autoregressive Distributed Lag (ARDL) model is employed to estimate both short-run and long run dynamics, with inflation rate incorporated as a moderating variable. The study applies a comprehensive set of econometric techniques, including unit root tests. The empirical findings reveal that revenue-sharing arrangements exert a statistically significant effect on IGR, leading to the acceptance of the alternative hypothesis (H₁). Similarly, grants and transfers demonstrate a statistically significant relationship with IGR, supporting the acceptance of (H₂). Sub-national debt is found to have a statistically significant negative effect on IGR, confirming. These findings underscore the critical role of fiscal structure and intergovernmental financial relations in shaping sub-national revenue performance.Based on these findings, the study recommends that state governments should reduce excessive dependence on revenue-sharing allocations, improved compliance systems, and diversification of revenue sources