IMPACT OF OIL AND TAX REVENUE ON CAPITAL BUDGET EXPENDITURE IN NIGERIA

Abstract

Capital Budget Expenditure is vital to the economic, business and social welfare of any country, especially for the fact that its importance spans across all works of life and has great impact on business proceedings. Over the years, Nigeria has recorded low implementation of capital budgets and is yet to move above 75 percent implementation within a fiscal year since the inception of her democracy (1999); with expenditure percentages staggering between 6 percent to 65 percent between 2010 to 2016. This study examined the impact of government revenue on capital budget expenditure in Nigeria between 2009 First Quarter – 2017 Fourth Quarter. The study highlighted the importance of the various revenue components, thereby testing the efficacy of wagner’s theory in Nigeria. The dependent variable is capital budget expenditure, while the independent variables are oil revenue and company income tax, alongside two control variables: exchange rate and gross domestic product. The study made use of time series data; and the variables being a combination of I(0) and I(1) were subjected to ARDL model estimation in the short and long run. The Wald test showed that a long run relationship exists between government revenue and capital budget expenditure. The ECT was highly significant, with a very high adjustment speed to equilibrium after every quarter, thus concluding that government revenue influences government expenditure, recommending that all available frontiers of revenue including other forms of oil and non-oil tax should be given necessary attention.