The contribution of some revenue sources to the total expenditure of an oil-producing state in Nigeria

Abstract

This paper examines the contribution of Statutory Allocation, Internally Generated Revenue, Value Added Tax, External and Internal Loans to the Total Expenditure of Akwa Ibom State, an oil-producing State in Nigeria. Data was obtained from the financial statement Bulletin of the Office of the Accountant General of the State. The dataset obtained was found to be normally distributed under the Kolmogorov-Smirnov Normality test. A multiple linear regression model was fitted to the data. Results show that Statutory Allocation, Internally Generated Revenue, Value Added Tax, External and Internal Loans contribute significantly to the total expenditure of the State Government. Furthermore, the fitted model is good for prediction, with about 90.6% of the total variation in the total expenditure being explained by the linear relationship with revenues received from Statutory Allocation, Internally Generated Revenue, Value Added Tax, and External & Internal Loans. Results from partial F-test show that when each regressor enters the model first, the inclusion of the other regressors is worthwhile. Moreover, Statutory Allocation explains about 66.5% of the total variation in the State’s total expenditure, which is the highest explained by any of the regressors. Hence, it contributes most significantly to the State’s total expenditure.