Veritatis Gaudium: Multidisciplinary Journal of Postgraduate Studies

This study examined the effect of revenue allocation on local government performance in Isoko North Local Government Area and Isoko South Local Government Area, Delta State. Anchored on Fiscal Federalism Theory by Wallace E. Oates and Anwar Shah, the study adopted a quantitative survey design. Data were collected from 150 local government officials, with 132 valid questionnaires returned, representing an 88% response rate. Descriptive statistics, correlation, and regression analyses were used for data analysis. Findings revealed heavy dependence on federal allocations, weak internally generated revenue, limited fiscal autonomy due to state interference through the State Joint Local Government Account, and dominance of recurrent expenditure over capital projects. These factors negatively affected service delivery in healthcare, education, sanitation, and infrastructure. Regression results showed that fiscal autonomy and revenue adequacy positively influence performance, while state interference has a significant negative effect. The study concludes that structural fiscal reforms are necessary to improve local government performance and recommends enhanced fiscal autonomy, strengthened IGR, and improved accountability mechanisms. This work recommends that the State Joint Local Government Account should be restructured to allow direct allocation of funds to local governments, which will allow fiscal autonomy and performance, as well as Fiscal rules should be introduced to limit recurrent expenditure and prioritize capital investment. This work demonstrates that fiscal autonomy is a stronger determinant of performance than revenue adequacy alone, thereby extending existing literature.

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