This research was driven by Nigeria’s continuing fiscal deficits, a low tax-to-GDP ratio, and volatile petroleum-dependent revenues, all of which weakened public infrastructure financing and macroeconomic stability. Accordingly, the study assessed how tax revenue affects public budget deficits in Nigeria by using time-series data covering 1981 to 2024. It adopted a quantitative longitudinal research design. The Autoregressive Distributed Lag (ARDL) model was used to examine both short-run and long-run relationships after unit root tests (Augmented Dickey-Fuller and Philip-Perron) established that the variables were a mixture of stationary series. The empirical findings showed that total tax revenue has a statistically significant positive impact on public budget outcomes in both the long and the short run, thereby confirming its essential contribution to fiscal stabilization. Disaggregated results indicated that indirect taxes consistently enhanced the budget balance, while direct taxes and higher public expenditure initially created short-term fiscal strain, attributable to compliance costs and spending pressures. Even so, highly significant negative error-correction terms indicated a swift adjustment back to long-run equilibrium after temporary shocks. The study concluded that tax revenue mobilization significantly reduces public budget deficits. It recommended that fiscal authorities prioritize full tax administration digitalisation, broaden the tax net, and rigorously enforce the Fiscal Responsibility Act in tandem with spending controls.
