Government Revenue and Expenditure in Nigeria: A Bayesian Analysis of Oil and Non-Oil Revenue and Recurrent and Capital Expenditure

This study examined the relationship between government revenue and government expenditure in Nigeria, focusing on the effects of oil and non-oil revenue on recurrent and capital expenditure. It extended Akanbi (2021) by applying a Bayesian framework that accounts for parameter and model uncertainty. Secondary fiscal data from the Central Bank of Nigeria Statistical Bulletin and other official sources were analyzed using descriptive statistics, stationarity and cointegration diagnostics, Bayesian linear regression, posterior inference, MCMC diagnostics, posterior predictive checks, Leave-One-Out cross-validation and Bayesian Model Averaging. The results indicate positive associations between revenue and expenditure, with differences across expenditure components. For recurrent expenditure, non-oil revenue showed a strong positive relationship, while the evidence for oil revenue was less certain. For capital expenditure, both oil and non-oil revenue showed positive and credible relationships, with non-oil revenue having the larger posterior mean. Bayesian Model Averaging further indicated stronger support for non-oil revenue in recurrent expenditure and strong support for both revenue sources in capital expenditure. The study highlights the importance of sustainable domestic revenue mobilization and improved expenditure management for fiscal sustainability in Nigeria.