MODERATING EFFECT OF SUBNATIONAL STATUTORY ALLOCATION ON THE RELATIONSHIP BETWEEN TAX REVENUE AND FISCAL SUSTAINABILITY OF NIGERIAN STATES

Abstract

This study empirically examined the moderating effect of subnational statutory allocation on the relationship between tax revenue and fiscal sustainability of Nigerian states. Specifically, the paper examined how subnational statutory allocation moderates the relationship between Pay-As-You-Earn (PAYE) tax revenue and fiscal sustainability, as well as the moderating role of subnational statutory allocation on the nexus between non-PAYE tax revenue and fiscal sustainability across Nigerian states. Anchored on fiscal federalism theory and the resource dependence theory, the study adopted the qualitative research approach, giving due considerations to the concepts and empirical literatures of prior related studies. Evidence from empirical literatures considered showed that that subnational statutory allocation commendably moderates the relationship between PAYE tax revenue and fiscal sustainability, whereas its moderating effect on non-PAYE tax revenue and fiscal sustainability  was quite insignificant. These findings underscore the pivotal role of statutory allocations as complements to internally generated revenues in sustaining fiscal health among Nigerian subnational governments.