Internally generated revenue and capital expenditure of the public sector in the southwestern states of Nigeria

Type of the article: Research ArticleAbstractThe paper examines the effect of internally generated revenue (IGR) on the capital expenditure of the southwestern states in Nigeria. Tax, fines, and fees, as well as earnings and sales, are used to measure the revenue generated through internally generated revenue (IGR), while the amount spent on the provision of capital assets like roads, building construction, and other social amenities is used to measure capital expenditure incurred during the period under review. Secondary data were collected from each of the six southwestern states of Nigeria’s Internal Revenue Service Boards, the Office of the Accountant General of each of the six Southwestern States, the Central Bank of Nigeria (CBN), and the National Bureau of Statistics (NBS) over 1999–2023. Descriptive statistics, correlation analysis, and multiple regression methods with other diagnostic tests, such as the unit root test and heteroskedasticity, were conducted. Findings showed that both taxes and earnings and sales have a positive and significant effect on capital expenditure in southwest Nigeria. In comparison, fees and fines have a negative and significant influence on capital expenditure. The study concluded that there is a significant relationship between internally generated revenue (IGR) and the development of capital expenditure in the southwestern states of Nigeria. It is recommended that the government focus on strategies to increase revenue through IGR.