This study examined statutory allocation and budget implementation in Nigeria. This study covered all the six states of southwest geopolitical zone of Nigeria including Lagos State, Ogun State, Oyo State, Osun State, Ondo State and Ekiti State, over the period of 10 years spanning from 2008 to 2017. Data used in the study were collected from National Bureau of Statistics, Office of the Accountant General of the Federation, and annual budget of the selected states. The study made use of static panel estimation techniques such as pooled OLS estimator, fixed effect estimator and random effect generalized least square estimator, as well as Dumitrescu- Hurlin panel based granger causality test. Result showed that statutory allocation exert s insignificant , positive impact on actual expenditure to the tune of 0.109719 (p = 0.000 < 0.05), and that there is no existence of causal relationship between statutory allocation and actual expenditure of southwest states in Nigeria. The study thus established that though impact of statutory allocation on actual expenditure is positive, such impact is not significant in the context of southwest states, and that past period statutory allocation to southwest states does not significantly depict the level of budget implementation in the current period. In addition , this study established among other things that there is heterogeneity effect across southwest states in the discourse of statutory allocation and budget implementation. Thus the study underscores the place of states uniqueness in the matter of budget implementation. Hence state government especially in the southwest geopolitical zone should device budget implementation plan based on the reality , their revenue generating capacity, without much dependence on federal government allocation in other to improve the effectiveness and efficient of revenue mobilization and disbursement for project execution and state management for each fiscal year.
The subject of statutory allocation is an intricate part of budget implementation of state especially in a country where fiscal federalism forms the basis for national resources mobilization and disbursement. The role played by statutory allocation in the discourse of state management has become a contentious issue of debate in recent time [
The level of budget implementation in most southwest states is far from being satisfactory both in terms of recurrent expenditure and capital expenditure. For instance, the level of expenditure implementation in Ekiti stood at 73% in 2011, 89% in 2013 [
1) Impact of actual statutory allocation on actual expenditure of southwest states in Nigeria;
2) Causal relationship between actual statutory allocation and actual expenditure of southwest states in Nigeria.
This is the allocation from the federal government that goes to each state as a means of revenue assistance from Federal Government. This allocation is sometimes based on some criteria such as population of the state, availability of natural resources and the need for infrastructural development in the state. Statutory allocation is the amount standing to the credit pf the Federation account less the sum equivalent to 13 percent of the revenue accruing to the federation account directly from any natural resources as a first line charge for distribution to the beneficiaries of the derivation funds. Statutory allocation to state is based on the sharing of the federation account in which 56% goes to the federal government, 24% to the state government and 20% to local government [
Budget implementation entails the execution of budget based on the key assumptions and benchmark that defines the budget structure. According to [
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This study made use of a single equation modeling in which budget implementation measured in terms actual expenditure was specified as a function of statutory allocation (STA), alongside internally generated revenue as control variable. The model used in this study is a adapted version of the model used by [
Y i t = α 0 + α 1 STA i t + α 2 IGR i t + μ i t (1)
The new version of the above model replaced gross domestic product with measure of budget implementation as presented in functional and linear forms below
AE =f(STA, IGR)
AE i t = α 0 + α 1 STA i t + α 2 IGR i t + μ i t (2)
This study covered all the six states of southwest geopolitical zone of Nigeria including Lagos State, Ogun State, Oyo State, Osun State, Ondo State and Ekiti State, over the period of 10 years spanning from 2008 to 2017. Data used in the study were collected from National Bureau of Statistics, Office of the Accountant General of the federation, and Annual budget of the selected states.
This study made use of static panel estimation techniques such as pooled OLS estimator, fixed effect estimator and random effect generalized least square estimator. The static estimators were evaluated using post estimation test such as restricted F-test (to compare pooled OLS estimation result with the fixed effect estimation result for heterogeneity effect validation across sampled state, and over the period covered in the study) and Hausman test (to compare fixed effect estimation result with random effect estimation result in the quest to ascertain the most consistent and efficient estimation result). Causal relationship between actual statutory allocation and actual expenditure was analyzed with the use of Dumitrescu-Hurlin panel based granger causality test.
This section presents results of analysis conducted in the study. Presented in this section include results of correlation analysis, pooled OLS analysis, fixed effect analysis, random effect analysis, as well as post estimation test results
As shown in
As shown in
AE | STA | IGR | |
---|---|---|---|
AE | 1.0000 | ||
STA | 0.5327 | 1.0000 | |
IGR | 0.9813 | 0.5282 | 1.0000 |
Sources: Author’s Computation, (2019).
Variable | Coefficient | Standard Error | T-Test Values | Probability |
---|---|---|---|---|
C | 46.82036 | 6.931485 | 6.75 | 0.000 |
STA | 0.1013295 | 0.1516894 | 0.67 | 0.507 |
IGR | 1.707277 | 0.0526464 | 32.43 | 0.000 |
R-square = 0.9632; Adjusted R-square = 0.9619; F-statistics = 745.46; Prob(F-stat) = 0.0000.
across southwest states in Nigeria is not incorporated into the model, statutory allocation exert insignificant positive impact on actual expenditure, to the tune of 0.1013295 (p = 0.507 > 0.05) reported R-square stood at 0.9632, thus reflecting the capacity of statutory allocation and internally generated revenue of southwest states to explain about 96% of the systematic variation in actual expenditure.
As shown in
As shown in
As shown in
CROSS-SECTIONAL SPECIFIC EFFECT | TIME SPECIFIC EFFECT | ||||
---|---|---|---|---|---|
Variables | Coefficients | Prob | Variables | Coefficients | Prob |
C | 127.7877 | 0.000 | C | 24.58784 | 0.060 |
STA | 0.1281688 | 0.352 | STA | 0.0022463 | 0.990 |
IGR | 1.380541 | 0.000 | IGR | 1.709912 | 0.000 |
Effects | Effects | ||||
Ogun State | −95.55128 | 0.001 | 2009 | 11.03268 | 0.531 |
Oyo State | −63.27248 | 0.031 | 2010 | 20.66339 | 0.233 |
Osun State | −62.67727 | 0.040 | 2011 | 25.84719 | 0.138 |
Ondo State | −85.92425 | 0.006 | 2012 | 31.43288 | 0.095 |
Ekiti State | −88.25731 | 0.005 | 2013 | 33.03869 | 0.083 |
2014 | 36.81312 | 0.046 | |||
2015 | 40.27401 | 0.024 | |||
2016 | 33.05381 | 0.061 | |||
2017 | 32.71452 | 0.064 | |||
R-square = 0.9747 Adjusted R-square = 0.9713 F-statistics = 286.47 Prob(F-stat) = 0.0000 | R-square = 0.9691 Adjusted R-square = 0.9620 F-statistics = 136.75 Prob(F-stat) = 0.0000 |
Sources: Author’s Computation, (2019).
Variable | Coefficient | Standard Error | Z-Test Values | Probability |
---|---|---|---|---|
C | 51.36311 | 10.024 | 5.12 | 0.000 |
STA | 0.109719 | 0.1391975 | 0.79 | 0.431 |
IGR | 1.608215 | 0.0822179 | 19.56 | 0.000 |
R-square = 0.9632, Wald chi2(5) = 445.59, Prob > chi2 = 0.0000. Source: Authors’ Computation (2019).
F-statistics | Probability | |
---|---|---|
Cross sectional | 4.75 | 0.0012 |
Time specific | 1.02 | 0.4397 |
Source: Author’s Computation, (2019).
corresponding to the cross sectional specific units are equal to zero, but otherwise for the period specific intercepts. Hence this validated that there is cross sectional heterogeneity/uniqueness effect amidst southwest states in the discourse of statutory allocation and budget implementation.
As shown in
Null hypothesis | Chi-square stat | Probability |
---|---|---|
Difference in coefficient not systematic | 5.45 | 0.0654 |
Source: Author’s Computation, (2019).
differences in coefficients of fixed effect estimator and random effect estimation is not significant. Thus random effect estimation presented in
As shown in
The study established first that, there is a mildly strong correlation between statutory allocation and actual expenditure of southwest states in Nigeria, which connote that rising (or falling) statutory allocation is happening fairly synchronously as rising (of falling) government actual expenditure. Secondly estimation result presented in
This study established that though the impact of statutory allocation on actual expenditure is positive, such impact is not significant in the context of southwest states, hence the study underscores that higher statutory allocation to southwest state might not culminate into significant improvement in the level of budget implementation. This study also established that past period statutory allocation to southwest states does not significantly depict the level of budget implementation in the current period. In addition, this study established among other things that there is heterogeneity effect across southwest states in the discourse of statutory allocation and budget implementation. Thus, the study underscores the place of states uniqueness in the matter of budget implementation. Hence state
Null hypothesis | W-Stat | Zbar-Stat | Probability |
---|---|---|---|
STA does not homogeneously cause AE | 0.7518 | −0.4298 | 0.6673 |
AE does not homogeneously cause STA | 1.5215 | 0.9033 | 0.3664 |
Note: *connote rejection of the null hypothesis at 5% significance level. SOURCE: Author’s Computation, (2019).
government especially in the southwest geopolitical zone should device budget implementation plan based on the reality their revenue generating capacity, without much dependence on federal government allocation in other to improve the effectiveness and efficiency of revenue mobilization and disbursement for project execution and state management for each fiscal year.
The authors declare no conflicts of interest regarding the publication of this paper.
Olaoye, F.O. and Bankole, T. (2019) Statutory Allocation and Budget Implementation in Southwest Nigeria. Open Journal of Social Sciences, 7, 125-135. https://doi.org/10.4236/jss.2019.77012