Effect Of Macroeconomic Determinants on Revenue Generation in Osun State, Nigeria

Abass A. Adewale, Lucky S. Ozabeme, Lukmon A. Raji & Frank E. Eyanbho

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Abstract

This study examined the effect of macroeconomic determinants on revenue generation in Osun State, Nigeria, for the period 2008 to 2023. The research was motivated by the growing need for Nigerian states to strengthen internally generated revenue to achieve fiscal sustainability. The study specifically assessed the effect of Value Added Tax on internally generated revenue, examined the effect of total public borrowing, and investigated the relationship between exchange rate movements and internally generated revenue. An ex post facto research design was employed, and this was solely based on secondary data from the Central Bank of Nigeria and Osun State Internal Revenue Service. The data was summarised using descriptive statistics, and correlation and multiple regression were used to analyse how the various variables related. The results showed that Value Added Tax has a significant positive effect with a high coefficient on internally generated revenue and thus is an important element of revenue mobilisation at the state level. The study examined the effect of macroeconomic determinants, which are proxied by Value Added Tax (VAT), Total Public Borrowing, and Exchange Rate Movements, on internally generated revenue in Osun State. The results revealed that Total Public Borrowing had a negative and insignificant effect, indicating that borrowing does not significantly boost internally generated revenue. Exchange Rate Movements exhibited a positive but statistically insignificant relationship with internally generated revenue. The study concluded that strengthening VAT enforcement, broadening the tax base, and improving compliance measures are essential strategies for achieving sustainable revenue collection in Osun State and reducing overreliance on borrowing.

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