Modeling Nigerian Government Revenues and Total Expenditure Combined Estimators’ Analysis and Error Correction Model Approach

Abstract

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. Statistical and econometric
techniques used for the data analysis are unit root test, cointegration test,
combined estimators’ analysis, the error correction model (ECM) and the
feasible generalized linear (FGLS) estimators. Results showed that the variables
are non stationary but are stationary at first difference. The long-run
relationship of total expenditure on oil revenue, non-oil revenue, federation
account and federal retained revenue revealed that the variables are cointegrated and required the use of combined estimators. The effect of nonoil revenue and federal retained revenue is very significant. Investigations on
the short-run modeling necessitated the use of FGLS estimators. The effect
of ECM and federal retained revenue is very significant. Consequently, other
sources of revenue apart from federal retained revenue need to be enhanced and
tailored towards improving economic growth and development through national
expenditure.