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Government Revenue and Expenditure in Nigeria: A Disaggregated Analysis

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  • Damian C Nwosu
  • Harrison O Okafor

Abstract

This paper examined the relationship between both total (TEXP) and disaggregated government expenditure (current (TREXP) and capital expenditures (TCEXP)), and total (TREV) and disaggregated revenue (oil (OILREV) and non-oil revenues (NOREV)) in Nigeria using time series data from 1970 to 2011. The study utilized co-integration techniques and VAR models which included an Error Correction Mechanism (ECM) as the methods of analyses. The Co-integration tests indicate the existence of long run equilibrium relationships between government expenditure variables and revenues variables. The VAR results also show that total government expenditure, capital and recurrent expenditures have long run unidirectional relationships with total revenue, oil and non-oil revenue variables as well as unidirectional causalities running from expenditures to revenue variables. The findings support spend-tax hypothesis in Nigeria indicating that changes in government expenditure instigate changes in government revenue. The policy implication derivable from this study is that increase in government expenditure without a corresponding increase in revenue could widen the budget deficit. Therefore, government should explore other sources of revenue especially the non oil minerals sector, and also reduce the size of large recurrent expenditure and move towards capital and other investment expenditures. Government should also consider expenditure reforms analysis vis-à-vis taxes and all other revenues sources (oil and non oil) reforms in other to help set targets for revenue mobilization and utilization as well as device a way of expenditure spreading over the entire economy.

Suggested Citation

  • Damian C Nwosu & Harrison O Okafor, 2014. "Government Revenue and Expenditure in Nigeria: A Disaggregated Analysis," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(7), pages 877-892.
    • Handle: RePEc:asi:aeafrj:v:4:y:2014:i:7:p:877-892:id:1220
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    Citations

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    Cited by:

    1. Balogun Abdulrasheed, 2017. "Causality between Government Expenditure and Government Revenue in Nigeria," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 4(2), pages 91-98.
    2. Andrzej Karpowicz & Zbigniew Korzeb & Paweł Niedziółka, 2022. "Macroeconomic and sectoral specific determinants of bank levies’ inflows in European Union," Bank i Kredyt, Narodowy Bank Polski, vol. 53(2), pages 183-202.
    3. Ullah, Nazim, 2016. "The relationship of government revenue and government expenditure: a case study of Malaysia," MPRA Paper 69123, University Library of Munich, Germany.
    4. Mohammad Ali Al Hayek, 2018. "The Relationship between Revenues Size and Actual Expenditures through the Closing Account Result of the Jordanian Government," International Journal of Business and Management, Canadian Center of Science and Education, vol. 13(2), pages 1-40, January.
    5. Aminu, Alarudeen & Raifu, Isiaka Akande, 2018. "Dynamic Nexus between Government Revenues and Expenditures in Nigeria: Evidence from Asymmetric Causality and Cointegration Methods," MPRA Paper 97880, University Library of Munich, Germany.
    6. Olawunmi Omitogun & Farouq Adekunle Akanni & Adedayo Emmanuel Longe & longeemmanuel28@gmail.com, 2019. "Disaggregated Government Expenditure and Education Enrolment in Nigeria," Business & Management Compass, University of Economics Varna, issue 4, pages 309-326.
    7. Rotimi Comfort Omolayo & John Naphtali & Rotimi Mathew Ekundayo & Doorasamy Mishelle, 2022. "Assessment of the Impact of Government Revenue Mobilisation on Economic Growth in Nigeria," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 32(4), pages 81-108, December.

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