Impact of Revenue Fiscal Decentralization on Consumption Cost in Nigeria

Abstract:

The paper considers the impact of revenue fiscal decentralization on cost of living in Nigeria using annual time series data that covered a period from 1981-2017. The specific objective is to determine the influence revenue allocations to federal, state, local governments and Niger Delta States derivation have on consumption cost. Ordinary Least Squares (OLS) method was employed to perform the multi-regression analysis with the aid of SPSS version 20. The findings revealed that revenue allocation to the federal government (FAFG) exerts significant negative influence on consumer price index (CPI i.e. proxy for consumption cost). On the contrast, revenue allocations to state (FASG), local governments (FALG) and derivation allowance to the Niger Delta States (DRVN) have significant positive impact on CPI. The study confirms the theory of fiscal decentralization and recommends that more revenue should be allocated to state and local governments, since they are in a better position than the federal government to attend to the needs of the citizenry through delivery of public goods and services at little or no cost.