FUEL SUBSIDY AND GOVERNMENT EXPENDITURE IN NIGERIA

ADEYEMI, PhD Babatope Ayodeji () and Olasunkanmi Lanre ()
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ADEYEMI, PhD Babatope Ayodeji: Department of Economics, Postal: Olabisi Onabanjo University, Ago-Iwoye, Nigeria,, https://jted.citn.org/
Olasunkanmi Lanre: Department of Accounting, Postal: Olabisi Onabanjo University, Ago-Iwoye, Nigeria,, https://jted.citn.org/

Journal of Taxation and Economic Development, 2023, vol. 22, issue 2, 13-31

Abstract: This study examined the impact of fuel subsidy on government expenditure in Nigeria. Fuel subsidy have long been a contentious issue, as they strain government budgets and have implications for fiscal sustainability. Through an empirical analysis, this study explored the relationship between fuel subsidy and government expenditure, shedding light on the potential consequences for economic development and public finances. An Autoregressive Distributed Lag approach (ARDL) which allows for both short-run and long-run dynamics to be captured the effect were used with inference at 5% significant level. The study findings shows that changes in fuel subsidy do not appear to have a significant impact on government expenditure, both in the short run and the long run. This implies that alterations in fuel subsidy policies may not directly affect the government spending. The findings of this study provide valuable insights for policymakers and stakeholders involved in government budgeting and resource allocation in Nigeria. It suggest that efforts to increase government expenditure should consider the potential positive impact of oil revenue, premium motor spirit consumption. Policymakers may also consider the stability and reliability of these revenue sources when planning and prioritizing government spending. Based on the finding, the study recommended since oil revenue has a positive and significant impact on government expenditure, it is recommended that the Nigerian government focuses on diversifying its revenue sources. This can reduce the dependence on oil revenue and provide a more stable and sustainable funding base for valuable sectors.

Keywords: Economic Development; Fiscal Sustainability; Fuel Subsidy; Government Expenditure (search for similar items in EconPapers)
JEL-codes: H25 H53 (search for similar items in EconPapers)
Date: 2023
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