MULTIPLICATION MODEL AND LINEAR TREND MODEL IN FORECASTING INTERNALLY GENERATED REVENUE OF AKWA IBOM STATE FROM 1994 TO 2013
The history of internally generated revenue in Nigeria dates back to the pre-colonial period when tax and levies were paid to the fathers or lords as the case may be to the Obas, Kings Emirs.
Such pre-colonial states as the Hausa – Fulani state of the North, the Kanem – Bornu States of the North east, the Western monarchies of the Yorubas, the Benin Empire and the gerontocracies of the Igbos played a prominent part. This pre-colonial history was essentially that of the migration and fussion of people and the rise and fall of states and empires.
The apparent financial bargaining muscles of the central government at the federal level over the sub-national governments at the states and local council levels is the Nigeria’s model of fiscal federalism.
An investigation into the activities of government revenue in the country has clearly revealed three major sources to include Federal account revenue, internally generated revenue and sundry capital receipts.
The importance of internally generated revenue in any country, and of course Nigeria cannot be over-emphasized as it has been the bedrock of government performance. Even during the colonial era, it was used to support the sustenance of the colonial administration. It had also been used to mobilize farmers into cash crop production mainly for the colonial export.
It has also been used for the running of the affairs of the post independence government in Nigeria. It is axiomatic therefore that internally generated revenue will continue to play important role in Nigeria economy.
1.2 REVIEW OF INTERNALLY GENERATED REVENUE OF AKWA IBOM STATE GOVERNMENT
Located in South-South zone of Nigeria, Akwa Ibom State was created in September, 1987 out of the old Cross River State. The State is bordered on the east by Cross River State, on the west by Rivers State and Abia State, and on the South by the Atlantic Ocean.
From the inception of the State in 1987 to date, the State has experienced governance under nine different administrations (Six military and three civilian governors) but with one main objective.
Main objective of transforming the State from a massively rural economy to a vibrant diversified one through;
(i) The provision of infrastructural amenities such as electricity supply, pipe borne water supply, construction and renovation of new and old roads respectively, construction of railways, airports.
(ii) Building of industries
(iii) Provision of standard health facilities
(iv) Raising the standard of education, among other things.
In order to realize this objective, these administrations often adopted strategies for the realization of set goals. These include intensification of efforts on internal revenue generation at all levels including Government Boards and parastatals as it is an indisputable fact that internally generated revenue is a bedrock for economic planning, policy formulation and implementation.
This research work is based on the revenue generated to the State through ministries, Departments, Boards, and Parastatals. At the State level, the State Internal Revenue Service, which is responsible for collecting the bulk of internally generated revenue, is headed by a Chairman with Heads of Ministries and Extra-Ministerial departments. At the Local Government level, the Board is headed by the area authority that takes charge in the collection, compilation and forwarding returns of collection made to the Chairman at the Board’s Headquarter on a weekly basis. These are paid into Sub-treasury of the respective Local Government Areas.
The collection of returns is carried out by the Accounts and Statistics Departments at the Headquarters. The weekly compilation are then put together to form monthly collection of Ministries, Parastatals, Boards and Departments.
This revenue so collected over the years had been on the increase since 1994 according to Akwa Ibom State Government Finance Statistics (2013), a publication of Akwa Ibom State Ministry of Finance and Economic Development.
The development is attributable to various stringent measures adopted to boost internal revenue generation. Particularly, reinvigorating the internal revenue generation mechanism through the provision of necessary working tools, motivation, training and re-training of revenue staff.
According to the Commissioner for Finance and Economic Development, some of the measures taken by the present administration of Governor Godswill Akpabio to boost internally generated revenue include
- Supply of 110 laptops to Revenue Officers
- Purchase of 8 Hilux Pick-up Vans and 4 Eighteen-seater buses for Revenue Staff.
- Purchase of 60 Q-Link motor cycles for Revenue Staff
- Establishment of Revenue courts in the three (3) Senatorial Districts of the state.
- Purchase and installation of a 250 KVA perking’s sound – proof generator for the Internal Revenue Service headquarters.
- Computerization of the Budget office.
He remarked that the computerization of operations of the Revenue Board has really helped in checking leakages and other shady deals in the system.
1.2.1 INTERNALLY GENERATED REVENUE AS TIME SERIES
A time series is a type of stochastic process where observations are taken sequentially over time. Thus a time series stochastic process is phenomena which evolve as random function of time. (Karlin and taylor). The word ‘Stochastic’ which is of Greek origin is used to mean ‘Pertaining to chance’. Internally generated revenue is a non – deterministic phenomenon, and hence, a Stochastic process, because it is taken sequentially with time. A time series can be either discrete or continuous.
DISCRETE TIME SERIES: A time series is said to be discrete when observations are taken only at specific times, usually equally spaced. In other words, if the time series is such that has values at discrete time point, it is called discrete time series.
CONTINUOUS TIME SERIES: A time series is said to be continuous when observations are made continuously in time. Certain time series are by their very nature continuous. For instance, rainfall cannot be measured for a point in time, but for an interval of time viewed from the context of individual time points. Thus, rainfall is continuous.
This research work is mainly concerned with discrete time series, where the observations are taken at equal intervals (Monetary values of quarterly revenue).
1.3 STATEMENT OF THE PROBLEM
In the course of this research work, we intend to employ an efficient statistical model, which will be relevant and convenient for forecasting the future pattern of the revenue.
1.4 OBJECTIVES OF THE STUDY
The main objectives of this research work are:
(i) To analyze statistically the internally generated revenue of Akwa Ibom State from 1994 to 2013 using time series model.
(ii) To make predictions, on the basis of the analysis, about future internally generated revenue in the State, hence the provision of statistical advice to government on internal revenue generation in regards to effective economic development and future economic policies formation.
1.5 SIGNIFICANCE OF THE STUDY
The significance of the study lies in the fact that;
(i) It would help government in understanding the past behaviours of the revenue and in determining the rate of growth and the extent and direction of fluctuations.
(ii) The study of the past behaviour of the revenue enables us to predict future tendencies.
(iii) The government will intensify efforts on revenue generation and thereby plan its economy ahead.
(iv) It will also serve as a reference work for other researchers in the same field of study.
1.6 DATA AND METHOD OF COLLECTION
The efficiency of any method used in the collection of statistical data determines, to a large extent, the success and reliability of the entire result. Thus, the data used for this study were from the secondary source – Department of Statistics, Ministry of Finance and Economic Planning, Akwa Ibom State. The data covered a period of 1994 to 2013.
1.7 SCOPE OF THE STUDY
It is a known fact that government derives revenue from three major sources, which are Federation account revenue, internally generated revenue, and Sundry capital receipts. But for the scope of this study, emphasis is laid on internal revenue collection by Akwa Ibom State Ministries, Boards, Departments and Parastatals.
The researcher considers twenty year period (1994 – 2013) for the study for adequate information and accuracy.