Chapter One — 1.1 Background to the Study

Over the past decade, the relationship between fiscal federalism and local government autonomy has become a subject of considerable debate among scholars and industry practitioners alike, particularly within the context of Selected Microfinance Banks in Nigeria where operating conditions differ markedly from more developed markets.

Selected Microfinance Banks in Nigeria presents a useful setting for examining this relationship precisely because the conditions there — structural, regulatory, and behavioural — differ from those typically assumed in the broader literature, most of which draws on evidence from more developed economies.

1.2 Statement of the Problem

While fiscal federalism is widely discussed in policy and industry circles, empirical evidence on its actual effect on local government autonomy within Selected Microfinance Banks in Nigeria remains sparse and, in places, contradictory. This lack of localized, rigorous evidence makes it difficult for decision-makers to know with confidence whether current approaches to fiscal federalism are helping or hindering local government autonomy — a gap this study sets out to close.

1.3 Objectives of the Study

1. To examine the effect of Fiscal Federalism on local government autonomy in Selected Microfinance Banks in Nigeria.
2. To assess the extent to which fiscal federalism influences local government autonomy within the study area.
3. To identify the challenges associated with fiscal federalism in relation to local government autonomy.
4. To recommend strategies for optimizing fiscal federalism in order to improve local government autonomy.

1.4 Research Questions

1. What is the effect of fiscal federalism on local government autonomy in Selected Microfinance Banks in Nigeria?
2. To what extent does fiscal federalism influence local government autonomy within the study area?
3. What challenges are associated with fiscal federalism in relation to local government autonomy?
4. What strategies can be adopted to optimize fiscal federalism in order to improve local government autonomy?

1.5 Significance of the Study

This study is significant to a range of stakeholders. For policymakers and regulators, the findings offer evidence to guide the design of frameworks that support healthier outcomes around local government autonomy. For managers and practitioners within Selected Microfinance Banks in Nigeria, the study provides practical insight into how fiscal federalism can be better managed. Finally, it contributes to the academic literature on public administration by extending existing knowledge into a specific empirical context, and offers a reference point for future researchers.

1.6 Scope of the Study

In terms of scope, this MSc study confines itself to Selected Microfinance Banks in Nigeria, focusing specifically on how fiscal federalism relates to local government autonomy within that setting. Findings are interpreted within these boundaries rather than as universal claims applicable to every organization or market.