SUBNATIONAL PUBLIC FINANCE AND FISCAL SUSTAINABILITY: EMPIRICAL EVIDENCE FROM NIGERIAN STATES
The fiscal policy of the Nigerian government has proven unsustainable due to income deficiencies and heightened government expenditure, leading to substantial budget deficits. This study analyzed the effect of subnational public finance components on the fiscal sustainability of states in Nigeria from 2016 to 2022. Panel data were sourced from state audited financial statements, the Central Bank of Nigeria statistical bulletin, the National Bureau of Statistics, and the Ministry of Finance. Panel regression analysis was used to test the hypotheses. The study found that statutory allocation significantly affected the fiscal sustainability of states in Nigeria. The study also found that capital expenditure significantly affects fiscal sustainability in Nigeria. The study witnessed that recurrent expenditure has a negative significant effect on states’ fiscal sustainability in Nigeria. Finally, the study concluded that public debt has an insignificant effect on states’ fiscal sustainability in Nigeria. This reveals that public debt will not increase the fiscal sustainability of states in Nigeria. The study, therefore, recommends that state governments implement uniform fiscal policy measures to establish budget discipline, transparency, and accountability, with the objectives of improving living standards, increasing incomes, creating more jobs, enhancing education, and prioritizing the financing of local industries. Additionally, these measures should promote foreign investment by ensuring stable internally generated revenue, thereby aiding in the maintenance of fiscal sustainability.
Public Internally Generated Revenue, Subnational Public Finance, Statutory Allocation, Nigeria.