Al-Hikmah University Journal

This paper examined the relationship between government expenditure and government revenue in Nigeria using causality test with annual time series data from 1961-2019. The study reviewed the theoretical propositions which includes Tax-Spend Hypothesis, Spend-Tax Hypothesis, Fiscal Synchronization Hypothesis and Institutional Separation Hypothesis. The findings of this study validated the Tax-Spend hypothesis of the nexus between government revenue and government expenditure and invalidated the other hypotheses on the government revenue-expenditure nexus in Nigerian situation. Specifically, it was found that unidirectional causality ran from revenue per capita to government expenditure per capita but there was no causal relationship in any of the remaining five pairs of variables examined. It is recommended that, policy makers or regulatory authorities need to understand when the expenditure is overblown so as to take appropriate measures as a corrective action as well as diversifying the revenue base beyond oil revenue.