Causality between Government Expenditure and Government Revenue in Nigeria

This study seeks to establish the causality between government expenditure and government revenue in Nigeria. The type of research adopted is ex post-facto and the updated annual time series data between1986-2015 were obtained through Statistical data bulletins and annual reports of Central Bank of Nigeria in order to evaluate the variables such as total revenue and aggregate public expenditure of the federal government. The study applied co-integration statistical method and vector autoregressive techniques comprising an Error Correction Model (ECM) and Augmented Dickey Fuller as the methods of analyses. The findings showed that there is spend-revenue practice in Nigeria in line with the theory of Barro (1974); Peacock and Wiseman. (1979) indicating that changes in government expenditure triggered changes in government revenue. The Co-integration tests also revealed that there is existence of long run equilibrium relationships between government revenue and expenditure variables. The outcome of this study showed that increase in government expenditure without a simultaneous increase in revenue could broaden the budget deficit.