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Taxation, Revenue Allocation and Fiscal Federalism in Nigeria: Issues, Challenges and Policy Options

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  • Adeleke Salami

Abstract

Taxation is one of the most important and easy sources of revenue to any government, as the government possesses inherent power to impose taxes and levies. Nigeria tax system has been weak due largely to inadequate data of the tax base and heavy reliance on oil revenue. With the volatility in oil prices and excruciating impacts of the recent global financial crisis, taxation deserves more attention now than ever before in Nigeria. One issue that is critical to domestic resource mobilization and utilization is the issue of fiscal federalism. Nigeria operates three tiers of government; Federal, State and Local Governments with separate revenue, expenditure, and assigned responsibilities each. However, all decisions including resources are controlled from the centre and the vertical revenue allocations tilt more towards the direction of federal government, contrary to the tenets of federalism the country is practicing. Both vertical and horizontal revenue in Nigeria is engulfed in controversy. The paper presents key issues, trend and challenges of taxation and fiscal federalism in Nigeria. In addition, the paper highlights a number of suggestions that would stimulate increase in tax revenue and guarantee fiscal assignment acceptable to the federal and sub-national government

Suggested Citation

  • Adeleke Salami, 2011. "Taxation, Revenue Allocation and Fiscal Federalism in Nigeria: Issues, Challenges and Policy Options," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 56(189), pages 27-50, April – J.
    • Handle: RePEc:beo:journl:v:56:y:2011:i:189:p:27-50
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    References listed on IDEAS

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    1. Freinkman, Lev, 2007. "Intergovernmental relations in Nigeria: improving service delivery in core sectors," MPRA Paper 10032, University Library of Munich, Germany.
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    Cited by:

    1. E. P. Mbau & C. M. Iraya & M. Mirie & J. M. Njihia, 2020. "An Empirical Study on the Moderating Effect of Public Governance on the Relationship Between Fiscal Decentralization and Performance of County Governments in Kenya," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 9(2), pages 1-2.
    2. Romain Houssa & Kelbesa Megersa, 2020. "Capacity Support for Domestic Revenue Mobilization - The case of Belgian development cooperation and partner countries," BeFinD Working Papers 0131, University of Namur, Department of Economics.
    3. Temitope J. Laniran, 2017. "Fiscal regimes in resource dependent African states: a political economy game," Working Papers of the African Governance and Development Institute. 17/037, African Governance and Development Institute..
    4. Nurudeen Abu & Mohd Zaini Abd Karim & Joseph David & Musa Abdullahi Sakanko & Onyewuchi Amaechi Ben-Obi & Awadh Ahmed Mohammed Gamal, 2022. "The Behaviour of Tax Revenue amid Corruption in Nigeria: Evidence from the Non-Linear ARDL Approach," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 55-76.
    5. Peng, Fei & Zhou, Shibiao & Zhou, Peng, 2023. "Local government fiscal stress and corporate risk-taking: Evidence from a quasi-natural experiment in China," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1677-1695.
    6. Belinda Archibong, 2018. "Historical origins of persistent inequality in Nigeria," Oxford Development Studies, Taylor & Francis Journals, vol. 46(3), pages 325-347, July.
    7. Temitope J. Laniran, 2017. "Fiscal regimes in resource dependent African states: a political economy game," Research Africa Network Working Papers 17/037, Research Africa Network (RAN).
    8. Odunayo Magret Olarewaju & John Ayobamibo Olayiwola, 2019. "Corporate Tax Planning and Financial Performance in Nigerian Non‐Financial Quoted Companies," African Development Review, African Development Bank, vol. 31(2), pages 202-215, June.
    9. Hatzenbuehler, Patrick L. & Mavrotas, George, 2017. "Macroeconomic Factor Influence on Agricultural Program Sustainability in Kaduna State, Nigeria," Feed the Future Innovation Lab for Food Security Policy Research Papers 265415, Michigan State University, Department of Agricultural, Food, and Resource Economics, Feed the Future Innovation Lab for Food Security (FSP).
    10. Biobele Richards Briggs & Lenu Goodluck Wege & Lilian Okorite Nkanbia-Davies, 2020. "Financial Crime and Local Government Productivity in Rivers State," Journal of Contemporary Research in Business, Economics and Finance, Michael Laurence, vol. 2(3), pages 47-60.
    11. Khan, Karim, 2015. "Extractive Institutional Structure and Economic Development: Evidence from Nigeria," MPRA Paper 68559, University Library of Munich, Germany.
    12. Tahiru, Fati & Agbesi, Samuel, 2019. "Driver and Barriers of ICT Adoption in Revenue Collection in Ghana: A Case of Accra Metropolitan Assembly," 30th European Regional ITS Conference, Helsinki 2019 205216, International Telecommunications Society (ITS).
    13. Olivier Ecker & Patrick L. Hatzenbuehler, 2022. "Food consumption–production response to agricultural policy and macroeconomic change in Nigeria," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 44(2), pages 982-1002, June.
    14. Belinda Archibong, 2018. "Historical origins of persistent inequality in Nigeria," Oxford Development Studies, Taylor & Francis Journals, vol. 46(3), pages 325-347, July.
    15. Anyalechi Kenneth Chikezie & Onwumere Uchechukwu Joe & Boloupremo Tarila, 2017. "Fiscal Policy and the Nigerian Economy: An Econometric Review," International Journal of Business and Management, Canadian Center of Science and Education, vol. 12(4), pages 186-186, March.

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    More about this item

    Keywords

    Taxation; Revenue Allocation; Fiscal Federalism;
    All these keywords.

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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