Modeling Nigerian Government Revenues and Total Expenditure: An Error Correction Model Approach

The national total expenditure of a country is precipitated on several factors of which revenue generated could be one and very significant. This paper therefore examines the contribution of some selected sources of Nigerian government revenue to total national expenditure. Secondary data sourced and collected from Nigerian Statistical Bulletin of the Central Bank for a period of thirty nine (39) years were used. Statistical and econometric techniques used for the data analysis are unit root test, cointegration test and the error correction model (ECM). Results showed that the original variables are non stationary but are stationary at first difference. Further investigations resulted into the use of the error correction model whose parameters’ estimation was improved by the use of Feasible Generalized Linear (FGLS) Estimator. Findings revealed significant contribution of oil revenue, federation account (federal allocation) and federal retained revenue to the Nigeria total expenditure and that Nigeria may need to be very cautious as non-availability of revenue from these sources points to non-expenditure. These become very essential if the country will have to achieve its developmental goals and objectives towards development and economic growth, among other things