Al-Hikmah University Journal

The relationship between fiscal decentralisation and economic growth has been a subject of ongoing scrutiny. Yet, empirical findings have failed to provide a consistent guide due to a lack of consensus. This study therefore investigated the relationship between fiscal decentralisation and economic growth, using time series data from 1993 to 2021. The motivation for this study arises from the imperative to bridge the gaps in the existing studies and provide empirical insights into the effect of fiscal decentralisation on economic growth. Understanding whether fiscal decentralisation acts as a catalyst or impediment to economic growth is essential for policymakers, researchers, and stakeholders seeking to formulate effective strategies for sustainable development. This study investigates the relationship between fiscal decentralization and economic growth using time series data from 1993 to 202 in Nigeria. The objectives include examining the impact of decentralizing fiscal expenditure, revenue, and deficits on economic growth. The study also distinguishes between the federal government and sub-national government components of these fiscal aspects. The neoclassical economic growth theory and Bhardhan and Mookherjee's decentralisation model, guide the study, which employs the OLS estimation method on data from the CBN, IMF and World Bank data sources. The study reveals that sub-national expenditure and revenue decentralisation have a greater pro-growth effect than their federal government counterparts and that fiscal deficit decentralisation has no effect on economic growth in Nigeria. Consequently, the study recommends that policymakers should promote government revenue and expenditure decentralisation to enhance economic growth.