Evaluation of Government Income-Spending Hypothesis Nexus in Nigeria: Application of the Bound Test Approach
This study is a review of the relationship and dynamic interactions between government revenue and expenditure in Nigeria over the period 1981 to 2012. The analytical technique of Autoregressive Distributed Lag (ARDL) bound test as was exploited. From the results, it is obvious that there is evidence of fiscal synchronization between the fiscal variables. The policy implication of the findings of this study is that government should diversify its sources of revenue. This would ensure moving away from a single product economy to a multi product economy. It is believed if this is done, returns and impact of the non oil sector on government spending and the economy in both the short and long run would be much significant. Furthermore, the government should not make spending-tax decisions in isolation of tax-spend decisions. This is because the joint determination of revenues and expenditures is appealing as long as it effectively restrains the budget deficit. This means that efforts to enrich sources of revenue should be complemented by reductions in spending by Nigeria.
Revenue, Expenditure, Government, Bound Test, Nigeria
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