The Imperatives for Domestic Resource Mobilization for Sustained Post-Crisis Recovery and Growth in Sub-Saharan Africa

Eric Kehinde Ogunleye, African Center for Economic Transformation and Desire Adebimpe Fashina, Nigeria

The recent global financial and economic crisis has demonstrated the futility of continued dependence on foreign aid for financing economic growth in Sub-Saharan Africa (SSA). Genuine drive toward sustained post-crisis recovery growth, development and transformation will remain elusive if special efforts are not directed at improving domestic resource mobilization (DRM) and utilization. This paper articulates the imperative for DRM by analyzing the gamut of issues surrounding it in SSA. Employing Arellano-Bond GMM technique on a panel of 38 SSA countries, savings and investment turn out to be the only DRM variables that contribute positively and significantly to economic growth while all the tax revenue variables are insignificant, suggesting the need for improving the DRM process. For sustained post-crisis recovery, economic growth, development and transformation of SSA countries, emphasis should be placed on developing the local revenue mobilization and management process, reforming the tax system to promote harmonization and a shift away from tax exemptions, concessions and holidays, developing incentive schemes for punishing corrupt tax officials and rewarding upright ones, reforming the financial sector, leveraging IT to improve savings mobilization, reforming the global aid architecture with clear path for African countries to exit aid dependency and improve the business environment.