MODERATING EFFECT OF DIGITALISATION ON THE RELATIONSHIP BETWEEN TAX REVENUE AND BUDGET PERFORMANCE IN NIGERIA

Abstract

Inspired by persistent fiscal imbalances, and tax revenue compelled an exploration of the significance of digitalisation in securing Nigeria's enduring budgetary sustainability. This study investigates the moderating effect of digitalisation on the relationship between tax revenue and budget performance in Nigeria, using annual data from 1981 to 2024. The study employed quantitative longitudinal research design. The Autoregressive Distributed Lag (ARDL) model was employed to analyze both short-run and long-run dynamics after unit root tests (Augmented Dickey-Fuller and Philip-Perron) confirmed a mix of stationary variables. The results revealed that total tax revenue showed a significant positive impact on budget performance. When disaggregated, direct taxes had a negative effect, while indirect taxes had a marginally positive effect in the short run. The interaction term with tax revenue was negative but statistically not significant. The consistently significant negative error correction terms across all models confirmed a long-run equilibrium relationship. The study concluded that digitalisation adoption in Nigeria does not significantly moderate the relationship between tax revenue and budget performance. The study recommends prioritizing structural reforms and digital modernization to curb expenditures and ensure sustainable budget performance. Furthermore, full implementation of the Nigeria Tax Act 2025 is advocated to digitalize tax revenue streams and enhance collection efficiency across federal agencies.