FEDERATION ACCOUNT ALLOCATION AND ECONOMIC DEVELOPMENT IN NIGERIA
Abstract
In exploring the intricate relationship between federal allocations and Nigeria's economic development, this comprehensive study delved into the dynamics of financial disbursements across the federal, state, and local government levels from the federation account. The primary objective was to meticulously scrutinize the impact of these allocations on the overarching landscape of Nigeria's economic development.To conduct this investigation, the study employed a time-series approach, utilizing data extracted from the Central Bank of Nigeria's statistical bulletin spanning the years 2000 to 2020. The dependent variable chosen for this analysis was human capital development. Simultaneously, the study considered Federal Government's share, State Government's share, and Local Government's share from the federation account as independent variables. The methodological arsenal deployed included Ordinary Least Squares (OLS) for cointegration analysis, Granger causality test, unit root test, and the Vector Error Correction Model (VECM) to discern the long-term relationship between federal allocations and Nigeria's economic development.The results of the study revealed compelling insights into the influence of federal allocations on human capital development. Notably, the estimated model illustrated that federal allocation explained a substantial 91.7 percent of the variation in human capital development within the specified time frame. Further disaggregation of the data demonstrated that both federal and state allocations exerted a positive and statistically significant impact on human capital development. However, the study uncovered that while local government allocation displayed a positive effect, it did not attain statistical significance in relation to human capital development.Drawing from these findings, the study arrived at significant conclusions that federal allocations wield a substantial and meaningful effect on the country's economic progress. Recognizing the importance of these outcomes, the study recommends the establishment of a robust legal framework to underpin the allocation formula and spending policies across the three tiers of government..
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