Impact of Federal Government Revenue on Economic Growth in Nigeria

Abstract

This study assesses the influence of several federal government revenue components on Nigeria's economic growth from 1990 to 2024, employing the Autoregressive Distributed Lag (ARDL) methodology. The model incorporates oil revenue, tax revenue, federal retained revenue, grant revenue, and total debt as factors, all quantified in real monetary values (₦ billions). The findings indicate that oil revenue, tax revenue, and federal retained revenue are the three primary domestic sources of fiscal support that sustain economic growth; hence, their substantial positive influence on economic expansion is affirmed. Total debt is said to exert a negative and considerable impact on growth, indicating that the government's escalating borrowing and debt servicing expenses are constraining expenditures in essential sectors. Grant revenue exerts a modest yet favourable influence on the economy; yet its conditional nature underscores its restricted capacity to offer sustained fiscal support. The results indicate a rapid adjustment to long-term equilibrium, suggesting fiscal responsiveness within the Nigerian economy. These findings corroborate the Endogenous Growth hypothesis and affirm that the efficient mobilisation and use of public revenue enhance productivity and creativity. The report contends that Nigeria's economic performance is mostly influenced by local revenue mobilisation and prudent fiscal management, rather than external aid or unsustainable debt accumulation. The government is urged to enhance non-oil tax administration, manage debt more efficiently, improve fiscal transparency, and diversify the economy via strategic investments in agriculture, manufacturing, and technology-driven sectors, which are pivotal for achieving sustainable and inclusive growth.