Government revenue and expenditure relationship had been a source of concern in statistics, given its relevance in National Economic Planning and Policy making in Nigeria especially with respect to growth and stability of the economy. The purpose of this research work is to investigate and compare the estimates of 2SLS and 3SLS in predicting revenue and expenditure of Nigeria using revenue and expenditure data sourced from CBN Statistical Bulletin for a period of 54 years (1961-2014) and also examine the relationship between revenue and expenditure of Nigeria(CBN, 2014). The study consists of a system of three equations found to be over-identified through Order condition method. Revenue and expenditure data were analyzed using 2SLS and 3SLS. The results show that the models were adequate for use in making revenue and expenditure predictions. The study also reveals that 2SLS was a better model when compared 3SLS. Both models indicated that there was a declining revenue and increasing expenditure demands, which causes frequent Budget deficit and urgently call for a supplementary budget in most cases, it also reveal that the declining revenue affect Nigerian foreign reserved which is not healthy for the economy. Based on the above stated issues, the study therefore recommends that government should employ more ways in raising revenue to complement the ever raising expenditure; government should diversify the economy, engage qualified Statisticians in Economic and policy planning and also deemphasize the total dependence on oil revenue which was found to be the cause of declining revenue in Nigeria today.
Keywords: Government revenue, Government expenditure, 2SLS, 3SLS