Local Governments Revenue Component and Economic Development in Nigeria

Over the years and now, there has been considerable debate about the relationship between local government’s revenue structure and economic development level. Although macroeconomic theory postulates that local government’s revenue structure stimulate economic development level, empirical research has been less conclusive about this relationship. This study empirically examines this controversial relationship within the Nigerian context. Time series data on different types of local governments revenue structure and economic development level were collected from the Central Bank of Nigeria statistical bulletin, annual Central Bank of Nigeria reports, National Bureau of statistics and published allocation to local governments from the federation account sourced from the office of accountant general of the federation spanning from 1993-2019. Ordinary Least Square Multiple Regression, Auto Regressive Distributed Lag, Augmented Dickey Fuller, Unit Root test, Cointegration test, Granger Causality Test and Error Correction model was used in analyzing the data with the aid of E-view version 10. The empirical results indicate that local governments revenue structure significantly relate to economic development level, explaining about 75.9% and 74.1% of the total variation in poverty and unemployment. Local government revenue structures were found to significantly relate to economic development level. The empirical study therefore concludes that local governments revenue structure has the potency to make significant contribution to economic development level and recommends the application of best practices and effective management strategies to enhance revenue generation and utilization infrastructural projects so as to enable them fulfill their statutory responsibilities to the citizens at the grassroots thereby contributing their quota towards economic development in Nigeria