Tax Revenue, Public Debt and Infrastructural Development in Nigeria

Abstract

Nigeria's infrastructural development continues to fall below expectations despite numerous government initiatives through institutional, statutory, and regulatory measures. This is due to the country's lack of funding for infrastructure projects, which forces it to rely on both tax revenue and borrowing, especially from external sources. However, despite a number of tax changes, tax revenue's contribution to government expenditure has remained low, and Nigeria's external borrowing exposes the country to exchange rate volatility, high repayment obligations, and debt overhang effects that impede domestic capital formation and hamper economic growth. This study investigated how tax revenue and public debt affect infrastructural development in Nigeria. Company income tax and petroleum profit tax were used to represent tax revenue, while foreign debt was used to capture public debt. Government capital expenditure served as the proxy for infrastructural development, which was the dependent variable. The study applied an ex post facto research design, analyzing the data with ordinary least squares (OLS), alongside descriptive and correlation analysis. The results showed that company income tax has a significant positive effect on government capital expenditure, while petroleum profit tax and foreign debt have no significant effect. The study concluded that that despite PPT being a major revenue source, petroleum funds appear underutilized, mismanaged, or diverted toward recurrent expenditure rather than developmental projects. The study recommended that there is need for government to ensure stronger fiscal discipline so as to ensure that oil revenues are channeled into long-term development projects rather than recurrent expenditure.