Examining the Effect of Tax Revenue on Government Expenditure in Nigeria: An Empirical Investigation
Abstract
The study examined the effect of non-oil tax revenue generation on government recurrent expenditure in Nigeria. Specifically, the study explored the influence of company income tax; value added tax, customs and excise duties, capital gain tax on government recurrent expenditure in Nigeria between 2004 and 2023. Using an ex-post facto and longitudinal research design, the study employs the Fully Modified Ordinary Least Squares (FMOLS) estimation technique. The findings reveal that CIT has a negative and statistically insignificant influence on recurrent spending, indicating that increases in CIT do not enhance government operational expenditure and may deter business investment, thereby weakening the tax base. VAT, on the other hand, shows a positive and statistically significant effect, underscoring its role as a dependable and consistent revenue source for funding routine government functions such as salaries, healthcare, and education. Customs and Excise Duties exhibit a significant negative impact, suggesting instability in trade-related revenues due to factors such as smuggling, trade liberalization, and collection inefficiencies. CGT demonstrates a positive but statistically insignificant effect, pointing to weak enforcement, poor compliance, and limited contribution to fiscal sustainability. To improve fiscal efficiency, efforts should be made to diversify the tax base, streamline trade tax collection processes, and reduce policy loopholes to ensure a more stable and impactful revenue stream capable of supporting long-term recurrent expenditure.
Keywords
Capital gain taxcompany income taxcustoms and excise dutiesvalue added tax
References
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