Jennifer Odinakachi GODSPOWER1 , Uzoamaka Faith ONUNAKA2 , Ogechi
Eberechi ALPHEAUS3 John Uzoma IHENDINIHU4
1,2,3&4
Department of Accounting, Michael Okpara University of Agriculture,
Umudike, Nigeria.
Correspondence email address: [email protected]
Abstract
The study examined the relationship between fiscal policy and social inequality in Nigeria,
with a focus on the distributional effects of tax burden, public debt, and capital
expenditure Using time-series data from 1981 to 2023 and a Vector Autoregression (VAR)
model, the study evaluates how tax-to-GDP ratio, public debt-to-GDP ratio, and capital
expenditure-to-GDP ratio influence social inequality, proxy by the Gini coefficient. The
findings reveal that tax-to-GDP and capital expenditure-to-GDP ratios significantly affect
income inequality, while public debt shows no significant impact. The results highlight the
regressive nature of Nigeria’s tax system, low capital investment, and ineffective debt
utilization as key drivers of inequality. The study recommends progressive tax reforms,
increased capital spending, and improved fiscal accountability as pathways to achieving
equitable economic development.
Keywords: Tax-to-GDP ratio, capital expenditure, public debt, Gini coefficient, fiscal
policy.