The Nexus Between Public Revenue and Government Expenditure in Nigeria

Abstract

This study examined the effect of government revenue on government expenditure in Nigeria. The study used a retrospective research design and data was obtained from a statistical bulletin from the OECD, CBN, IFRS and National Bureau of Statistics for the period 1981 to 2020. Descriptive statistics, correlation and multiple regression analysis were used to analyze the data based on SPSS 20.0 and the Advanced Excel Analytical Toolkit 2018 package. The result revealed a positive and statistically significant relationship between corporate income tax (CIT) and Government Capital Expenditure (GCE). The relationship between Value Added Tax (VAT) and Government Capital Expenditure (GCE) is also positive and statistically significant. Furthermore, CIT and VAT have been shown to have a positive and statistically significant relationship with government recurrent expenditure (GRE), respectively. Thus, the study reveals a significant relationship between government revenue and government expenditure in Nigeria. Among other things, we recommend that the government increase the number of goods on which Nigeria is subject to VAT to expand net VAT revenue as well as the collection of other indirect taxes to improve all public spending on Nigeria's economic growth - in line with Keynesian theory of expenditure and economic growth. Furthermore, in order to increase revenue for the CIT, according to Adolf Wagner's law of increasing public spending, the government must use tax money to create a favorable economic environment that stimulates high levels of industrial activity, thereby greatly affecting corporate performance and profits.