The Impact of State Internally Generated Revenues on Total State Revenues and Financial Viability: A Case Study of Lagos State, Nigeria

Abstract

Internally Generated Revenue (IGR) has been a focus of attention in public financial management because of its key role to Total State Revenue and Financial Viability (TSR&FV). Constant neglect of IGR in states due to over reliance on federal allocation has led to shortage of TSR&FV for funding and governance. Researches have been conducted on IGR in public sector with focus on transport infrastructures, personal income tax, tax administration and tax evasion but with less emphasis on the impact of IGR on TSR&FV. Therefore, this study examined the probable impact of state IGR on TSR&FV of Lagos State, Nigeria. The study adopts ex-post facto research design. Secondary data were extracted from Nigeria Bureau of Statistics annual report of 2011 to 2021. Data were analyzed with descriptive and inferential statistics at 5% level of significance. The study revealed that state IGR positively impact TSR&FV (Adj.R2=0.99250, F(5,10)=244.1106, p=0.000). The study concluded that IGR have significant influence on TSR&FV and that IGR contribute maximally to TSR&FV. Moreover, Pay As You Earn tax has the highest contribution (63.9%) to state IGR while direct assessment and road tax have the least contribution of 3.9% and 2.1%, respectively. The study recommends that State government should ensure better revenue management and good governance to boost tax morale and tax compliance. Government should also put more policies on revenue generation, training of revenue officers, and funding of revenue agencies. Similarly, new revenue base should be identified and pursued within the ambit of the law to drive TSR&FV.