Federal Tax Revenue and Government Expenditure on Roads and Power in Nigeria

Abstract

Government spending on infrastructural development is a key driver for the growth and development of any economy. Evidence from literature has shown that Nigeria was lagging behind on spending for infrastructural development as every sector of the Nigerian economy is challenged with huge infrastructure deficit and decay. The extent of government spending on roads and power in Nigeria, funded from federal tax revenue had remain uncertain. Studies have shown that while many developed and developing countries have fully diversified to income from taxes to fund infrastructure for development, Nigeria was yet to fully integrate income from taxes into its development programmes. Therefore, this study examined the effect of federal tax revenue (companies income tax, petroleum profit tax, customs and excise duties, value added tax and tertiary education tax) on government expenditure on roads and power in Nigeria. The study adopted an expo facto research design. The study evaluated the effect of federal tax revenue on government expenditure on roads and power in Nigeria from 1994-2021. A purposive sampling technique was adopted. Data were extracted from the Central Bank of Nigeria Statistics Bulleting, Office of Budget and Fiscal Policy, Nigerian Exchange Group and the Federal Inland Revenue Services. The validity and reliability of data were premised on the statutory audit of the financial statements of the government agencies by the office of the Auditor General of the Federation. Descriptive and inferential (multiple regression) statistics were used to analyze the data at 0.05 level of significance. The study revealed that government expenditure on roads (Adj.R2 = 0.806, F (5, 21) = 25.097, p < 0.000) and government expenditure on power (Adj.R2 = 0.742; F (5, 21) = 17.63; p <0.05) were significantly affected by federal tax revenue. The study concluded that federal tax revenue influenced government expenditure on roads and power in Nigeria. Hence, the study recommended that as a priority, the Federal Inland Revenue Service and other relevant tax authorities should device and implement strategies that will ensure effective collection of tax revenue from taxpayers. The federal government should strengthen tax administration in the country through capacity development programmes for staff of the Federal