Effect Of Internal Generated Revenue On Economic Development (A Study Of Ado Ekiti, Ekiti State)

Project and Seminar Material for Economics

Effect Of Internal Generated Revenue On Economic Development (A Study Of Ado Ekiti, Ekiti State)


The study investigated the impact of internally generated revenue (IGR) on economic growth of Ekiti state, Nigeria. The inability of States and Local governments in Nigeria to generate enough revenue to cope with their expenditure responsibilities has been a serious challenge. The improper use of IGR and corruption have remained a setback to economic development in Nigeria, hence the clamour from the citizens. This study made use of ex-post facto research design to specifically examine the impact of total IGR (TIGR), Federal Government Independent Revenue (FGIR), States IGR (SIGR) and Local IGR (LIGR) Governments IGR on the Real Gross Domestic Product (RGDP i.e. proxy for economic growth) of the country. The time series data employed covered a period from 1981 to 2016 and were gathered from the Central Bank of Nigeria (CBN) Statistical Bulletin. The statistical tool used for the data analysis was the multi-regression and t-test for test of hypotheses. The findings of the study revealed that TIGR, SIGR and LIGR have robust and significant positive impact (p-value = 0.000 < 0.05) on RGDP, while FGIR also indicated positive and significant influence on RGDP. There was an existence of high correlation between the dependent and independent variables. The study concluded that the positive impact of IGR is not out of place but the physical evidence is apparently lacking and therefore government policies that could eradicate sharp practices in the government system are required. The study also recommends that government official with corruption history should not be allowed to continue to handle responsibilities rather; people with outstanding integrity should be given opportunity to occupy government positions that are sensitive and could help achieve economic development objectives.

Table of Content

Chapter One:


  • 1.1 Background of the Study
  • 1.2 Statement of the Problem
  • 1.3 Objective of the Study
  • 1.4 Research Questions
  • 1.5 Hypothesis of the Study
  • 1.6 Significance of the Study
  • 1.7 Scope of the Study
  • 1.8 Limitation of the Study
  • 1.9 Definition of Terms
  • 1.10 Organizations of the Study

Chapter Two:

Review of Literature

  • 2.1 Conceptual Framework
  • 2.2 Theoretical Framework
  • 2.3 Empirical Review

Chapter Three:

Research Methodology

  • 3.1. Research Design
  • 3.2. Sources of Data
  • 3.3 Method of Data Collection
  • 3.4. Model Specification
  • 3.5. Measurement of Variables
  • 3.3 Method of data Collection

Chapter Four

Presentation of Data and Analysis

  • 4.1 Introduction
  • 4.2 Presentation Data
  • 4.3 Analysis of Data
  • 4.4 Discussion of Findings

Chapter Five

Summary, Conclusions and Recommendations

  • 5.1 Introduction
  • 5.2 Summary of the Study
  • 5.3 Conclusions
  • 5.4 Recommendation
  • References

Chapter One


1.1 Background of the Study

Revenue generation in Nigeria local governments is principally derived from tax. Tax is a compulsory levy imposed by government on individuals and companies for the various legitimate function of the state (Olaoye, 2008). Tax is a necessary ingredient for civilization. The history of man has shown that man has to pay tax in one form or the other that is either in cash or in kind, initially to his chieftain and later on a form of organized government (Ojo, 2003). No system or rules can be effective whether foreign or nature unless it enjoys some measures of financial independence. Local governments in Nigeria have developed over a number of years. Historically, the development of direct taxation in local government in Nigeria can be traced the British pre-colonial period Under this period, community taxes were levied on communities (Rabiu,2004) recently the revenue that accrues to local government is derived from two broad sources, viz the external sources and the internal source An effective Local Government system rests majorly on the availability of human and material resources which the nation could mobilize and harness for local governments development. In 1976, the Federal Military Government then issued guidelines on local governments reforms. The reforms which gave recognition to local governments as the third tier of government whereby government activities at the local level were taken care of. In 1988, another reform of local government was established. This gave a substantial and unprecedented reform of autonomy to the local governments in the country. With this autonomy, greater responsibilities devolved on the local government therefore, became a common knowledge that most of the local government are finding it difficult to cope with the present level of responsibilities.

Most state governments in Nigeria do no longer perform their responsibilities simply because of poor finances arises from internally generated revenue. The bad financial situation is further aggravated by the prevailing inflationary situation in this country which erodes the value of funds available to render essential social services to the people. Economic growth is highly associated with fund, much revenue is needed to plan, execute and maintain infrastructures and facilities at the state government level. They need revenue generated for such developmental projects like construction of accessible roads, building of public schools, health care centers, construction of bridgesamong others are sources generated from taxes, royalties, haulages, fines and grants from states, national and international governments. Thus, state government cannot embark, execute and possibly carryout the maintenance of these projects and other responsibilities without adequate revenue generation.

1.2 Statement of the problem

The state government is faced with myriads of problems ranging from corruption and embezzlement, poor financing, mismanagement of funds to poor leadership. This has deterred the development of state government in Nigeria. The major issues are; what has contributed to the non-performance; is it because of total dependence on federal statutory allocation? Is it as a result of poor internally generated revenue drive? Is it because of ineffective utilization of available scarce resources or mismanagement by public office holder? Among others, state government has always been over dependent on the statutory allocation thereby causing the state government to underperform which includes;

  1. Dilapidated infrastructural facilities
  2. Unavailability of social services to rural populace.
  3. Underdevelopment of local communities.

Based on the above stated problems, it has become necessary to conduct an analysis on revenue generation in Ekiti state.

1.3 Objectives of the Study

The broad objective of this research is to evaluate the effect of internally generated revenue on the economic development of Nigeria; a case of Ekiti state.

The specific objectives are;

  1. To examine the relationship between internally generated revenue and economic growth in Ekiti state.
  2. To ascertain the extent which value added tax has contributed to government developmental effort.
  3. To evaluate the extent to which internally generated revenue has contributed to the economic growth in Ekiti state and it various sources.

1.4 Research Question

The following research questions guided the study;

  1. What is the relationship between internally generated revenue and economic growth in Ekiti state ?
  2. To what extent does value added tax contributes to government developmental effort ?
  3. To what extent does internally generated revenue has contributed to the infrastructural development in Ekiti state and it various sources.

1.5 Research hypotheses

A hypothesis is a theoretical conceptualization or an idea or guest regarding how researcher thinks the result of his study will look. It consists of a set of assumptions accepted previously as a basis of investigation. It is a proposition that is yet to be tested for its validity. For the purpose of this research study, three null hypotheses were formulated.

  • Ho1: The Total Internally Generated Revenue does not have significant influence on RGDP of Ekiti state.
  • Ho2: The Federal Government Independent Revenue does not impact on RGDP of Ekiti state significantly.
  • Ho3: The State Governments Internally Generated Revenue has no significant effect on Ekiti state RGDP.
  • Ho4: The Local Governments Internally Generated Revenue does not affect RGDP of Ekiti state significantly..

1.6 Significance of the Study

From the outlook, there is need for the state government to improve their performance. However, the research is significantly considering the closeness of state government to the grassroots’ people and the need to utilize substantial revenue for its various sources in addition to federal statutory allocation for developmental purpose.

The study will help to identifying some means of generating revenue that has been neglected over years. It will also be beneficial to the grassroots because improved revenue generation means improved standard of living in form of provision of social amenities such as road, hospital, park, drinkable water, rural electrification etc. The study will be educative as it will be a reference point for researchers.

1.7 Scope of the Study

The study would appraise the revenue generation for the period of five years (1999-2014) in Ekiti state. The research is intended to be carried out using secondary data. Secondary data will be obtained from the monthly revenue generation account from the office of Accountant General of Ekiti state.

1.8 Limitations of the Study

This study has some limitations most especially in the area of data collection which is to be covered and has time duration of five years (i.e. 2010–2014). Financial constraints as well as time available for the completion of the study are among other factors that would limit the scope of the study.

1.9 Definition of Terms

State Government:

According to Lawal (2000) State Government as a political sub-division of a nation in Federal system which is constituted by law and has substantial control of local affairs which includes the power to impose taxes or exact labor for prescribed purpose.


Public revenue could be defined as the funds generated by the government to finance its activities. In other words revenue is the total fund generated by government (Federal, state, local government/ to meet their expenditure for a fiscal year. This refers also to the grand total of money of income received from the source of which expenses are incurred. Revenue could be internal or external revenue.


This is the process of sourcing revenue for the local government in carryout their aim and objectives.
Internally Generated Revenue: Monies collected by a government through imposition of levies and taxes on facilities, incomes, sale of goods and services.


An increase in the capacity of an economy to produce goods and services, compared from one period of time to another.


The state of a country or region in terms of the production and consumption of goods and services and the supply of money.

Economic Growth:

An increase in the amount of goods and services produced per head of the population over a period of time.


Public expenditure refers to the expenses which the government incurs for its own maintenance, in the interest of the society and the economy in order to help other countries.


Tax can be defined as a compulsory levy by government on goods, services, income and wealth. It provides definite source of revenue for government expenditure. (Udeh 2008). It is the way by which government obtain extra money. It spent from income of individual and companies. Tax could be direct or indirect tax. A tax is a payment made by the taxpayers and used by the government for the benefits of all the citizens.

Tax Evasion:

This means illegal reduction in one’s tax liabilities, thereby paying less than the appropriate amounts and not paying at all.

Tax Avoidance:

This is the act of streamlining one’s financial affairs within the law so as to minimize the tax liabilities.


According to Ake (2001) Development is thus the process by which people create and recreate themselves and their life circumstances to realize higher levels of civilization in accordance with their own choice and values. It also a type of social change in which new ideas are introduces into a social in order to produce higher per-capital income and levels of living through more modern production methods and improved social organization.

1.10 Organizations of the Study

The chapter one consist of the introductory part of the study which includes the study background, the statement of the research problem, the study objective and scope of the study.

The second chapter is a critical review of other literatures relevant to the study and its objectives including the theoretical framework for the study. While the third chapter is methods of data collection, sampling and data analysis used in conducting the study. The fourth chapter centres around the research findings including an analysis of how it relates to previous findings. The fifth chapter consists of the summary of findings, conclusion and recommendations base on the study objectives.

Chapter Five

Conclusion and Recommendations

5.1 Introduction

This chapter summarizes the findings on the Effect Of Internal Generated Revenue On Economic Development a Study Of Ado Ekiti, Ekiti State. The chapter consists of summary of the study, conclusions, and recommendations.

5.2 Summary of the Study

In this study, our focus was on the Effect Of Internal Generated Revenue On Economic Development a Study Of Ado Ekiti, Ekiti State. The study is was specifically focused on examining the relationship between internally generated revenue and economic growth in Ekiti state; ascertaining the extent which value added tax has contributed to government developmental effort and evaluating the extent to which internally generated revenue has contributed to the economic growth in Ekiti state and it various sources.
The study adopted the ex-facto research design.

5.3 Conclusions

One of the IGR collection hindrances identified in the study is the inadequate provision of goods and services that will benefit common people and also boost economic growth. Based on this challenge people do not see payment of taxation and other levies as a civic responsibility (NGF, 2015). The study revealed that the impact of IGR on economic development in Nigeria is robust and positively significant. Everyone believes that government expenditure is high but lacks physical evidence due to corruption. Targets of achievable projects from IGR should be set and vigorously pursued.

5.4 Policy recommendations

Base on the findings of the study, the following recommendations were made:

  1. The state government should imbibe the culture of fiscal discipline as well as huge capital expenditure so as to ensure growth in output level in the state.
  2. The government should ensure that more funds are being expended on developmental project rather than stomach infrastructure couple with adequate and properly monitoring in order to achieve inclusive growth of output.
  3. The rate of interest should be market determined in order to encourage investment inflow into the state.
  4. Price control mechanism should be put in place with the aim of checkmating the undesirable effect of inflation rate on the economic output of the state.

Further research is recommended on investigation of the physical application of IGR on government expenditure in comparison with the IGR inflows in all the states and local governments in Nigeria.

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