The Impact Of Government Revenue Shocks On Macroeconomic Variables In Nigeria: 1981-2020

Authors

  • Musa Dauda , Philip O. Alege , Olabanji O. Ewetan

DOI:

https://doi.org/10.47750/pnr.2022.13.S10.618

Abstract

Governments all around the world, but notably those in emerging nations, work to attain full employment, stable prices, and equilibrium in the balance of payments. This is to guarantee that such nations will always be relevant and influential in world economic affairs. This has led governments to consistently use certain macroeconomic policies in recent years, specifically fiscal and monetary policies, with the express purpose of assuring quick, sustained economic growth. One such tool used to achieve the macroeconomic goal is fiscal policy using government revenue. This study examined the impact of government revenue shocks on the macroeconomic variables in Nigeria. Specifically, investigated the impact of government oil and non-oil revenue shocks on economic growth in Nigeria. The study employed the Dynamic Stochastic General Equilibrium model with the features that are evident in Nigeria such as the households, firms, monetary authority, fiscal authority, and the rest of the world. The study discovered that government oil revenue has a positive relationship with output and interest rate, while positive government non-oil revenue reacted negatively to output and interest rate in Nigeria. Since taxation is one of a country's funding sources, it remains insufficient and has counter consequences, the study suggests that the government should look for other sources of revenue because increasing tax rates logically results in higher tax burdens for individuals and businesses. As a result, purchase power parity will reduce, there will be a decline in production, and as a result, government revenue will decrease. Instead of a tax cap, it is preferable to promote domestic industries to broaden the tax base and help the country become self-sufficient and independent. To boost non-oil sectors like tourism, agriculture, FDI, and entrepreneurship and promote economic diversification, the nation must also increase its efforts in these areas.

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Published

2022-12-31 — Updated on 2022-12-31

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Articles

How to Cite

The Impact Of Government Revenue Shocks On Macroeconomic Variables In Nigeria: 1981-2020. (2022). Journal of Pharmaceutical Negative Results, 5049-5066. https://doi.org/10.47750/pnr.2022.13.S10.618