ABSTRACT

The study empirically examined the effect of direct taxes and government

expenditure on money supply between 1987 and 2016. Secondary method of

data collection was used to generate data for this study and the sources of the

data included annual reports /accounts and CBN statistical bulletin (2016).

Multiple regression of ordinary least square estimation was the tool used to

analyse the data in this study. In the model, money supply (as dependent

variable) was regressed on personal income tax, government expenditure and

company income tax. The study has revealed that there exists positive and

signfIcant relationship between government expenditure, personal income tax,

company income tax and money supply. This supports the Keynesian view of

government active intervention in the economy using appropriate various fiscal

policy instruments. The study therefore recommends that: Government should

use fiscal policy to complement the adoption of effective monetary policy and

maintain the rule of law to promote stability in the Nigerian economy.

Government should ensure that taxes and government expenditure are properly

managed in a manner that it will raise the nation 's production capacity and

accelerate its growth.