FISCAL FEDERALISM AND HORIZONTAL FISCAL IMBALANCE IN NIGERIA: IMPLICATIONS FOR EFFECTIVE SERVICE DELIVERY AT SUB-NATIONAL LEVELS
Matthew Gimba , Danjuma Yusuf, PhD and Abubkar Auwal Chull, PhD
Volume 6 Issue 1
Abstract
This study examines the dynamics of fiscal federalism and the persistence of horizontal fiscal imbalance in Nigeria, with particular focus on their implications for effective service delivery across states. Anchored on the fiscal imbalance theory the study argues that the extent to which sub-national governments can efficiently deliver public services is largely determined by their fiscal autonomy, revenue capacity, and equitable access to national resources. A descriptive research design was adopted, utilizing qualitative data from official financial reports, statutory allocation frameworks, government publications, and scholarly literature. Findings reveal that significant disparities exist among states in terms of revenue-generating capacity, largely influenced by uneven natural resource endowment, population differences, and inconsistent levels of administrative efficiency. These disparities create a structural horizontal fiscal imbalance that undermines fiscal equity and weakens service delivery at the state and local levels. The study further finds that the current revenue allocation formula remains heavily centralized and insufficiently responsive to the fiscal needs of economically disadvantaged states, resulting in inadequate funding for sectors such as education, healthcare, and rural infrastructure. Additionally, heavy dependence on federal transfers reduces the incentives of sub-national governments to broaden their internally generated revenue (IGR) base. The study recommends a review of the revenue allocation formula, improved fiscal decentralization, strengthened institutional capacity of states, and the adoption of needs-based and performance-driven fiscal transfers to promote more equitable service delivery across Nigeria. Keywords: Fiscal Federalism, Horizontal Imbalance, Nigeria, Service Delivery, Sub-National Level
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