An Evaluation of the Volatility Structure of the Internal Revenues Generated by the States of Nigeria

Abstract

There has been a drastic reduction in the revenue base of Nigeria due to oil price volatility and this in turn affects the amount of money that the three tiers of government get from the federation account. This, therefore, compels both the states and local governments to emphasize more on internal revenue generation strategies in order to complement the shortfall from the federation account. The study attempts to investigate whether there has been substantial improvement in internal revenue generation by Nigerian states both in aggregate and on a state-by-state basis when cross-sectionally compared. The study utilizes secondary data for the period of five years ranging from 2011 to 2015. The period is chosen because it is within the period volatility in oil prices appeared more frequent and also various tiers of government in the country claimed to have instituted strategies of diversifying revenue sources. The techniques employed for the purpose of analyses are descriptive statistics and ANOVA. Based on the data analysis and hypotheses testing, the results provide evidence for the failure to reject null hypothesis one. As for the second hypothesis, the decision is rejecting the null hypothesis. Hence, the study concludes that some states appeared more aggressive in internal revenue generation than others and also despite the increment in revenue figures on a yearly basis; the amount generated was not significant enough to be considered to have a material difference in the trend. The study, therefore, recommends that Nigerian states should concentrate more on internal revenue sources and employ feasible strategies that could lead to more revenue generation. Finally, future research in this area should be conducted to consider evaluating strategies put in place for revenue generation by various states in order to establish how effective or ineffective they are.