The Nexus between Taxation, Government Expenditure and Economic Growth in Nigeria (1981 to 2016)

Abstract

This paper examines the relationship between taxation, government expenditure, and economic growth in Nigeria. The study used linear regression model in which economic growth is a function of taxation, government expenditure, investment, and export, following descriptive research design and using the national income accounting framework. The time series data used in the study was sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin, and the analysis was conducted using Fully Modified Ordinary Least Squares (FM-LS) estimation technique. It was discovered that investment and export had a significant positive impact on economic growth, however government expenditure exerts a negative impact on growth in Nigeria. Meanwhile, taxation has no effect on economic growth in Nigeria, according to the estimate. As a policy tool, far-reaching effective internal control measures are needed to establish fiscal discipline in government expenditure. In addition, all non-productive activity and expenditures in government agencies and machinery must be discouraged.