Exploring the Relationship Between Infrastructural Development and Improved Internally Generated Revenue in Nigeria
Abstract
Due to the low revenue collection performance and poor infrastructural development in Nigeria, this study investigated the relationship between Infrastructural Development and Improved Internally Generated Revenue in Nigeria. The data was collected from the Central Bank of Nigeria and the Joint Tax Board. The Real Gross Domestic Product (dependent variable) was used as a proxy for Economic Growth. By extension, it is manifested in Infrastructural Development and Internally Generated Revenue (Independent Variable) of all the States and Federal Government of Nigeria. The data were subjected to various tests: Descriptive Statistics, the Augmented Dickey- Fuller unit root test, the correlation matrix, and ordinary least squares, the Generalized Method of Moments, and Vector Autoregressive (VAR). After the analysis, it was discovered that internally generated revenue significantly relates to infrastructural development. This study also found a unidirectional causality from infrastructural development to internally generated revenue. Furthermore, the result of the impulse responses found that infrastructural development responds to the long-run equilibrium after the shock of internally generated revenue. The variance decomposition reveals that infrastructural development responds to IGR whenever a change occurs. The findings of Vector Auto-Regressive -VAR (1) could forecast the IGR in Nigeria with a high degree of accuracy, and this shows the relevance of the results of this empirical exposition for fiscal policy formulation as it forms the basis for tax bodies and related agencies to consider the IGR threshold for Nigeria in the process of targeting adequate infrastructural development.
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