Empirical Investigation of Government Expenditure and Revenue Nexus; Implication for Fiscal Sustainability in Nigeria

The study attempted to find out if a long-run relationship exists between government expenditure and revenue. It also explored the direction of causality between the government expenditure and revenue growth. These were with a view to examining the nexus between government expenditure and revenue growth in Nigeria between 1961-2010. The study employed econometric techniques such as unit root tests, cointegration test, error correction mechanism and Granger causality tests. Times series data covering the period (1961-2010) on such variables as government expenditure, government revenue and real GDP were sourced from CBN Statistical Bulletin (2010) Edition, augmented with CBN Annual Report and Statement of Accounts (Various Years) and World Development Indicators (WDI) of the World Bank’s CD-ROM. The results from ADF and PP unit root tests show that both government expenditure and revenue are I(1) process. The two variables became I(0) after taking their first differences. Also, the results obtained from Engle-Granger and Johansen methods of cointegration tests indicate that there was no long-run relationship between government expenditure and revenue in Nigeria during the period under investigation. The result of the error correction model of government spending confirmed the non-existence of long-run relation between expenditure and revenue. The ECM coefficient is significant and positively signed showing that instead of convergence relationship, there was evidence of a divergence relationship (ECM coefficient=0.368; t=3.636; p<0.01). Similarly, the result of the error correction model of government revenue provided no evidence in support of long-run relationship between revenue and expenditure. The ECM coefficient is significant and positively signed showing that instead of a convergence relationship, there was evidence of a divergence relationship between government revenue and government expenditure (ECM coefficient=0.297; t=2.620; p<0.01). The study further conducted Granger causality tests, for the three lags used by this study, there was no causality, one-way or two-way between government expenditure and revenue invalidating spend-revenue as well as revenue-spend hypotheses. It rather provides evidence in support of institutional separation hypothesis. This implies that government decision to spend as well as government decision to raise revenue is independent of each other. The decisions on these two fiscal variables are made with no consideration for each other. The finding of this study has a serious implication on fiscal sustainability in Nigeria. Government spending should be based on revenue yields to reduce large fiscal deficits that are unsustainable to economic growth in Nigeria. The study concluded that institutional separation hypothesis holds in Nigeria during the period under investigation. Keywords: Fiscal sustainability, Cointegration, Convergence, Divergence, Long-run relatio

COVID-19 Outbreak and Behavioral Maladjustments: A Shift from a Highly Globalized World to a Strange World of Unique Isolationism

The outbreak popularly called COVID-19 which sneaked into the world system generally believed to have originated from China in the city of Wuhan  towards the last quarter of the  year 2019 in a manner yet to be unfold by the world powers has been judged to be a great threat to human activities and coexistence. The World Health Organization declared COVID-19 as a global pandemic between February and March, year 2020 and since then it has been a strange world. This paper examined the socio-economic changes and behavioral maladjustments resulting from this deadly disease. The demand and supply shocks as well as the use of fiscal stimulus from different countries and how some key variables respond are well analyzed and structured. The paper underlying some of the damages done to the socio-economic lives of people across the globe and highlight some recovery strategies and future prospects. It recommends spirituality as a winning strategy against carnality. The conclusion was drawn by emphasizing the supremacy of God in the fact that a microbe of invisible property could hastily change our world of global village to a strange world of isolated citie

Vat Revenue and State Investment Spending in Nigeria, 1994-2010.

This study attempted to determine the long-run equilibrium relationship and direction of causality between VAT revenue and state investment spending in Nigeria between 1994 and 2010. This were with a view to examining the link between VAT revenue and state investment spending in Nigeria.. Times series data on variables (state investment expenditure and VAT revenue) covering the period (1994-2010) were used. The data were sourced from CBN Statistical Bulletin 2010 edition and CBN Annual Reports (various years). The unit root property of each of the variables was investigated using ADF and PP unit root tests.  The study also employed Johansen cointegration technique to find out if group of I(1) variables converge to a long-run equilibrium, Vector Error Correction Mechanism (VECM) was used to find out the causal link between the two variables.  The result showed that both variables were I(1) process. Also, the two I(1) variables were found to converge to a long-run equilibrium.  Also, the VECM results indicate that long-run bidirectional causality existed between VAT revenue and state investment spending. The result also revealed short-run causal evidence between VAT revenue and state investment spending. This implies that VAT revenue influenced state investment spending and state investment spending also influenced VAT revenue. The study concluded that both short-run and long-run bidirectional causality existed between VAT revenue and state investment spending in Nigeria during the period under investigation. Keywords: causality, cointegration, converge, bidirectional, short-run relation, long-run relatio

Empirical Investigation of the Validation of Peacock-Wiseman Hypothesis; Implication for Fiscal Discipline in Nigeria

This study attempted to examine the direction of causality between government expenditure and revenue in Nigeria. This was with a view to examining the validity of Peacock-Wiseman hypothesis and its implications on Nigerian economy. Times series data on variables (government expenditure, government revenue and inflation) covering the period (1961-2010) were used after a thorough investigation of the statistical properties of these variables. The data were sourced from CBN Statistical Bulletin 2010 edition, CBN Annual Reports (various years) and World Development Indicators of the World Bank CD-ROM. The study employed Johansen multivariate cointegration technique, Vector Error Correction Mechanism (VECM) and standard Granger causality tests. The result showed that variables converge to a long-run equilibrium. Also, the VECM results indicate that unidirectional causality running from expenditure to revenue was found supporting Peacock-Wiseman spend-revenue hypothesis. Standard Granger causality test was also carried out on the first difference of the two fiscal variables; the result showed that there existed a short-run unidirectional causality running from expenditure to revenue validating Peacock-Wiseman spend-revenue hypothesis. Hence, this hypothesis holds in Nigeria both in the short-run as well as in the long-run. This implies that government spending induced government revenue growth in Nigeria. Also, the result of the impulse response revealed that the evolution of government expenditure and revenue followed a different trend. The study concluded that government spending decision occurred prior the decision to raise revenue during the period under investigation. Keywords: causality, multivariate, converge, uni-directional, short-run, long-run

Energy Consumption and Economic Growth Nexus: New Empirical Evidence from Nigeria

This study analysed the trend of energy consumption, real output, financial development, monetary policy rate and consumer prices and also examined the long-run relationship and direction of causality between energy consumption and economic growth with consideration for financial development, monetary policy rate and consumer prices. These were with a view to examining the relationship between energy consumption and economic growth in Nigeria during the period 1971-2010. The result showed that all the variables used in the study are characterized by a positive trend. Also, it was found that variables followed a I(1) process. The study provides weak evidence in support of long-run relationship between energy consumption and economic growth. The study further revealed that energy consumption among other variables positively and significantly influenced output growth in the short-run. Using the first three lags, we found no causal evidence one way or two way between energy consumption and economic growth. The study concluded that energy consumption only has short-run positive impact on the economy but has not enhanced long-run economic growth in Nigeria during the period under investigation. Keywords: Error correction model; aggregated analysis; energy consumption; financial development; monetary policy rate JEL Classifications: O13; O47; Q4

The Nexus of Government Spending, Price, Output, and Money in the ECOWAS Sub-Region: Evidence from Panel ARDL and Causality Approach

The question of how macroeconomic variables dynamically interact is very crucial in any broad-based economic integration aiming at expanding economic growth and living standard in any human society. This study examined the nexus of government spending, price, output, and money in the ECOWAS sub-region using panel ARDL and causality approach. Data covering the period (1981–2019) were collected mainly from the latest version of the World Development Indicators. The result showed a positive relationship between government spending with GDP, import, exchange rate, unemployment rate, and population growth rate but a negative relationship between government spending with inflation, money supply, export, and interest rate. The result further showed short-run unidirectional causality running from government spending to inflation, money supply to inflation as well as money supply to GDP. Short-run bi-directional causality existed between GDP and inflation but none between government spending and GDP nor between government spending and money supply. The result of long-run Granger causality test showed bi-directional causality between government spending with inflation, government spending, and money supply; GDP and inflation; and GDP and money supply. Unidirectional causality ran from GDP to government spending; and money supply to inflation. The overall implication of this study established that an increase in government spending lowered inflation and raised the living standard of people in the ECOWAS sub-region in the long run. The study therefore concluded that any rise in import, unemployment rate, exchange rate, and population growth rate would raise government spending growth rate in the short run; and an increase in government spending would shrink inflation and boost economic growth and living standard in the long run