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Corruption is an anti-social behaviour conferring improper benefits contrary to legal and moral norms, which undermine the authorities to improve the living conditions of the people. It is one of the greatest challenges of the contemporary world today. The increasing wave of corruption  and  its  devastating  impact  on  the  Nigeria  economy  has become  a  national problem which has triggered serious research interest within the academics and the industry. This research project therefore is an evaluation of the Impact of Corruption on Fiscal Policy Management in Nigeria. Accordingly, the study explored the extent to which corruption in the fiscal  policy  management  can  affect  government  expenditure,  deficit  financing  and  tax revenue. The study adopted ex-post facto research design. It was conducted using 12 year annualized time series data spanning  the period,  2000-2011.  Data were generated  from the Central  Bank of Nigeria Statistical Bulletin and Transparency International  website. A computer based regression analysis  using  the  Special  Package  for  Social  Science  (SPSS)  computer  version  was employed  to test  three formulated  hypotheses  of the study. Evidence from the descriptive analysis  of  the  research  indicated  that Nigeria  is highly  corrupt  going by the rating  of transparency international. But comparing the transparency initiative rating with the Nigeria fiscal policy parameter, this study concludes that corruption rather has a significant positive effect on overall government expenditure and tax revenue but no significant positive effect on deficit  financing  in  Nigeria.  In  line  with  this  conclusions,  the  researcher  recommends amongst  others  that  government  leadership  should  cultivate  strong  willingness  to  fight corruption head-on. To achieve this, they should have the political will to prosecute corrupt officers instantly they are caught.




Corruption  is one of the greatest  challenges  of the contemporary world today.  Literarily, corruption connotes an anti-social behaviour conferring improper benefits contrary to legal and moral norms, which undermine the authorities to improve the  living conditions of the people  (Osaba,  1996;  Tanzi,  1998;  Folorunso,  2007).    To  the  developing  countries,  the

prevalence of corruption vary from country to country. In Nigeria precisely, corruption has posed  serious  danger  to  both the micro  household  and  the economy as a whole.  It has undermined good government, distorted public policy, harmed the private sector, hampared public sector development and have particularly hurt the poor (Transparency International;

2008). Farida, (2010) in Obasanjo ,(2010:2) put it that corruption is the greatest single bane for our society today.  According  to Alemika,  (2004),  corruption  is a serious  problem  in Nigeria today as it is increasingly widespreading  and unfortunately being  tolerated by the public.

Corruption in Nigeria seems to have acquired immunity against various political and  legal measures aimed at its control. Since independence in 1960, successive administrations have been enmeshed in crises of confidence ochastrated by corruption as reflected in the processes of  policy  formulation  and  implementation.  In  the  first  republic,  corruption  was  kept  at manageable level. Cases of corruption during this period were sometimes clouded by political fighting. The trend has for long changed as the evil wind has permiated into all the facets of the Nigerian economy and mostly the fiscal policy environment.

Conventionally,  fiscal  policy  has  been  associated  with  the  use  of  taxation  and  public expenditure to influence the level of economic activities (Okoro, 2009:340). It is an economic measure  which involves  the deliberate  use of government  spending  and  taxes to achieve macroeconomic  growth.  The  implementation  of fiscal policy is  essentially  routed  in the government  budgets.  The  budget  is  therefore  more  than  a  plan  for  administering  the government sector. It rather reflects and shapes a country economic life. The first recorded corruption in fiscal policy management in Nigeria can be traced back to the pre-independence period when in 1944, a firm belonging to Azikiwe and family bought the African Continental Bank in Lagos (Uche,  1997:57).   A report  wrote that most of the paid-up  capital of the

African  Continental  Bank  were  fund  diversion   from  the  Eastern  Regional   Financial Corporation (Chuta, 2004). During the first republic (1960 – 1966), some  political office holders were noted for undisguised personal enrichment.  Some of the ministers then did not pretend on how they made their ill-gotten gains.

During a certain civilian regime, the sum of N200 Million supplementary allocations  to  a state government meant for the payment of salary arrears disappeared. Chuta, (2004:27) lends credence to this where he says that corruption had become so pervasive, and may have been given official recognition to the extent that the disappearance of the sum of N 200 Million as supplementary  allocation to a state government,  for the  payment  of overdue salaries was dismissed  simply  as  owing  to  “change  of  hand”.     Corruption  has  pre  occupied  and confounded the minds of Nigerians for decades. Magbadelo, (2006:2) states that ever since Nigeria’s first republic collapsed in July 1966 amid allegations of massive corruption, the fight against corruption have developed into an important public policy issue.


The increasing wave of corruption and its devastating impact on national economies  have become a global problem so much so that some World Bank researchers have embarked on the study of this problem  in some developed  countries of the world.   Hence,  the current researcher’s interest is to do a similar research here in Nigeria to find out the extent to which

corruption  in  the  fiscal  policy  management  can  affect  government  expenditure,  deficit financing and tax revenue.

The choice to study the impact of corruption on fiscal policy management as measured from the stand point of government expenditure as well as deficit financing is predicated on the fact that the incidence of corruption is frequently reported in these areas in Nigeria.  Also, the researcher became interested in this topic because corruption in  fiscal policy management seems to reduce the funds budgeted to be spent on the basic needs. There are a lot of reported cases  of  abandoned  projects.    Again  there  is  low  contribution  of  tax  revenue  to  the government revenue.  All these situations compelled the researcher to investigate the extent to which corruption affects fiscal policy management.

Besides, the recent wave of corrupt practices noticed amongst the political office holders in Nigeria has had a negative impact on the people of the country.  These corrupt practices are written in our dailies and are always reported on the television or sometimes we hear of them through radio announcements.  Hence, the researcher resolved to find out, through a thorough investigative  research, the actual impact of corruption  on the fiscal policy management in Nigeria.


Generally,  this  research  is  set  to  evaluate  the  impact  of  corruption  on  fiscal  policy management  in Nigeria.  Consistent  with  the  above  statement  of problem,  the  study will specifically achieve the following three cardinal objectives:

a.   To determine the impact of corruption on aggregate expenditure in Nigeria.

b.   To examine the impact of corruption on deficit financing in Nigeria

c.    To evaluate the impact of corruption on tax revenue in Nigeria


Based on the above research problem and the objectives of the study, this research will seek answers to the following questions:

a.     To what extent does corruption affect government overall expenditure?

b.    To what extent does corruption affect deficit financing in Nigeria?

c.     To what extent does corruption affect tax revenue of the government in Nigeria?


Arising from the statement of problem, the research objectives, and the research questions, the following null hypotheses were formulated as a guide for the study:

HO:     Corruption  does  not  have  any  significant  positive  effect  on  government  overall expenditure

HO:     Corruption does not have any significant positive effect on deficit financing in Nigeria

HO:     There is no significant positive impact of corruption on tax revenue in Nigeria.


This study will be of immense benefits to several groups of people including the government, business organizations and in the academics. Amongst these personages, their benefits shall be in diverse ways such as:

Government: The result of this study will help the Nigeria government to improve on the implementation of fiscal policy in Nigeria.  The product of this research work will serve as a guide  on budgetary  allocations  as well  as  implementation  to  the relevant  sectors  of the Nigeria economy.  It will enhance the management of budgetary allocations to ensure that the budgeted amounts are really spent as planned.

Policy  Watchers  and  Analyst:  The outcome  of this research  is also  expected  to be  of significance to policy watchers and analyst. This group of people will utilize the platform of this study in their analysis on corruption and fiscal policy performance in Nigeria.

Public: Similarly,  the general public, through the findings of this research, will be  better informed  on the level, nature and impacts of corruption  on the Nigerian  economy.  Such insight will enable the public understand the need for them to partner with the government to fight corruption to the barest minimum.

Academics:  Academically,  this  study will  contribute  to  the  enrichment  of  literature  on corruption  in  the  public  sector.  It  will  empirically  establish  the  significant  impact  of corruption  on  fiscal  policy  performance.  The  study  is  expected  to  provide  important information to guide future researchers.


This study focuses on the  impact  of corruption  on fiscal policy management  in  Nigeria. Accordingly,  the study evaluates  corruption  as it affects  government  expenditure,  deficit financing  and tax revenue  respectively.  The  research  is a twelve  (12)  year  study which captures  the  time-frame  2000-2011.  This  period  is  justified  as  it  encapsulates  the  new transition era and the journey so far in the Nigeria democracy.


One major limitation of this study is data generation. Getting statistical quantitative data on corruption covering 12 years period is expected to pose some challenges. This is because, Nigerians at the moment have poor attitude towards data documentation and preservation.

Another major limitation is the paucity of substantial local literature on corruption and fiscal policy performance. This is also expected to affect the quality of this work. The reason is because, although the study is meant to close a local gap, foreign theoretical and empirical studies made up the bulk of data used in the review of literature.

1.9      Operational Definition of Terms

Deficit  Financing:   Deficit   financing   occurs  when  a  government   deliberately   allows expenditure to exceed revenue.

Embezzle: To take (money or property) for one’s own use in violation of a trust.

Fiscal Operations: This refers to government’s  financial transactions involving  collection, spending and borrowing funds for a given period.

Fraud: Implies manipulating a situation or circumstance for a private gain.

Mismanagement: This refers to bad or improper management.

Per Capita Income: This refers to the income of each person in an economy.

Rent  Seeking:  Is derived  from economic  concept  ‘rents’  which implied  excess  carnings above necessary costs.

Squander: To spend wastefully or extravagantly.

Tax Avoidance: Means not paying completely what one is supposed to pay as tax.

Tax Evasion: Implies avoiding payment of tax.

This material content is developed to serve as a GUIDE for students to conduct academic research



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