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An Empirical Analysis of Tax Revenue and Government Spending in Nigeria (2012-2023)

Olaoye Festus Oladipupo & Olatunji Opefolu Francis

Abstract

This study empirically assessed the effect of tax revenue on government spending in Nigeria. The study specifically examined the effect of tax revenue on government consumption expenditure; assess the effect of value-added tax on government consumption expenditure in Nigeria. This study employed a quantitative research design utilizing time series data analysis and relied exclusively on secondary data sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin. The data set covers a ten-year period from 2013 to 2022. The study employs a combination of descriptive and inferential statistical techniques. The Jarque-Bera test and their associated probability reveal that all three variables are normally distributed, as none of the probabilities are below the 0.05 significance level. Pairwise Granger Causality test, Robust Least Square and Johansen Cointegration test were used to analyze the data to establish the relationship between tax income revenue and recurrent spending. Government Consumption Expenditure (GCE) Granger causes Total Tax Revenue (TTR) and Value Added Tax (VAT) Granger causes GCE, given their probability (0.0166 and 0.0172, respectively) are below the 5% significant level. The robust least squares regression results revealed that Value Added Tax (VAT) has a significant positive influence on Government Consumption Expenditure (GCE), with a coefficient of 5.10 and a probability value of 0.007. In contrast, Total Tax Revenue (TTR) has a negative but statistically insignificant effect on GCE, as evidenced by its high probability value (0.7058). The study concludes that Value Added Tax (VAT) has a significant positive effect on government consumption expenditure but there is no statistically significant effect from total tax revenue. The cointegration test also verifies the presence of the long-run equilibrium relationship between aggregate tax revenue, government consumption expenditure, and VAT. The study re

Keywords

Tax RevenueGovernment SpendingGovernment Consumption ExpenditureValue

References

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