Price change effects on government tax revenue in Nigeria

Abstract

This study examined the effects of price changes, specifically inflation rates, exchange rates, and crude oil prices, on government tax revenues in Nigeria. The findings revealed that variations in inflation rates did not significantly affect tax revenue, suggesting that short-term inflationary pressures have a limited influence on fiscal outcomes. In contrast, exchange rate fluctuations had a notable impact on tax revenue, as currency depreciation changes the local currency value of traded goods, exports, and imports, thereby affecting taxable income and customs duties. Similarly, changes in crude oil prices had a significant impact on government revenue, reflecting Nigeria’s heavy reliance on oil-related fiscal inflows, including taxes, royalties, and other oil-linked payments. Overall, the results indicate that government tax revenues are resilient primarily to inflation but highly sensitive to external shocks, notably exchange rate movements and fluctuations in the global crude oil price. These findings highlight the importance of fiscal policies that stabilise currency, diversify revenue sources, and reduce dependence on oil.