IIARD International Institute of Academic Research and Development

Journal of Accounting and Financial Management (JAFM )

E-ISSN 2504-8856
P-ISSN 2695-2211
VOL. 10 NO. 9 2024
DOI: 10.56201/jafm.v10.no9.2024.pg63.78

---

Effect of Company Income Tax on Foreign Direct Investment in Nigeria

Chukwu Peter E., E. A. Adegun Enang, Ekwere Raymond PhD

---

Abstract

The main objective of this study was to evaluate the effect of company income tax on foreign direct investment in Nigeria. The design adopted for this study was ex-post-facto; data used for analysis were elicited from Central Bank Statistical Bulletin and Federal Inland Revenue Service Annual Reports. To achieve this objective, a model was formulated based on empirical and theoretical reviews. The model used foreign direct investment inflows in to Nigeria as the dependent variable, while company income tax was used as the independent variable in the model. This study employed the Fully Modified Least Squares (FMOLS) Model to analyze data.The findings elicited from this study revealed that company income tax with p-value of 0.0000 had negative and significant effect on foreign direct investment in Nigeria within the scope of this study From the inferential result, the researchers concluded that company income tax had negative and significant effect on foreign direct investment in Nigeria. From the foregoing, the researcher recommended that government and the appropriate monetary authority review company tax policy by giving out tax incentives and tax reliefs to companies operating within Nigeria in order to encourage them to continue investing in Nigeria.

keywords:

Company Income Tax, Foreign Direct Investment, Central Bank of Nigeria, Fully

---

References:

Alfaro, L. Areedam C. Sebnem K. O. and Selin S. (2001). “FDI and Economic Growth: The Role
of Financial Markets”. Working paper 01-083. Harvard Business School.

Amuka, J., and Ezeudeka, F. (2017). Tax Incentives and the Flow of Foreign Direct Investment to
Non-oil Sector: Empirical. Asian Journal of Social Sciences and Management Studies, 4(1),
57-64.

Andre, F. (2015). Tax Effects in Portugal. Lisbon School of Economics and Management

Appah, E. (2010). The Problems of Tax Planning and Administration in Nigeria: The Federal and
State Government Experience. International Journal of Lab. Organ Psychology, 4(1-2): 1-
Ariyo, A.(1997). Productivity of the Nigeria including capital Gains Tax and Capital Transfer Tax.
Lagos: Jaja Publishing Ltd.
Berkeley. (2019). Foreign Direct Investment and Applicable Tax Incentives. Retrieved from
www.berkeleylegal.com.ng/2018/03/16/foreign-direct-investment-and-applicable-tax-
incentives/. [Accessed 9th April, 2019].

Bhartia, H.L. (2009). Public finance, (14th ed.). New Delhi: Vikas Publishing House PVT Ltd.

Bhinda, N. Griffith-Jones, S. and Martin, M. (1999). Private Capital Flows to Africa: Government
in Nigeria. European Journal of Accounting, Auditing and Finance Research, 5(2), 1– 11.

Buckley, P. J., Clegg, J., and Wang, C. (2002). The Impact of Inward FDI on the Performance of
Chinese Manufacturing Firms. Journal of International Business Studies, 33(4) 637 – 655.
Central Bank of Nigeria (2019). CBN Annual Report and Statistical Bulletin for the year Ended
31st December 2019.

Chen,
J.
(2018).
Investment.
Retrieved
from
https://www.investopedia.com/terms/i/investment.asp. [Accessed, 9th April, 2019].

Cung, N. H., andHua, L. (2013). Tax Burden and Foreign Direct Investment: Theory and Practice
in Vietnam. Advances in Management and Applied Economics, 3(3), 85-103.

Dalton, H. (1964). Principles of Public Finance, (8th ed.). Routledge and Kaganpalu Ltd, London.

Davies, R. B., Siedschlag, I., and Studnicka, Z. (2016). Corporate Taxation and Foreign Direct
Investment in EU Countries: Policy Implications for Ireland. ESRI Quarterly Economic
Commentary. 1-23

De Mooij, R., and Ederveen, S. (2006). Taxation and Foreign Direct Investment: A Synthesis of
Empirical Research. International Tax and Public Finance,10, 673-693.

Ebekozien, A., Abdul-Aziz, A. R., and Jaafar, M. (2018). A Comparative Study of Foreign Direct
Investment in Nigerian Construction Sector during Military Regime and Democratic
Government from 1984 to 2017. International Trans Journal Engineering Manage Applied
Science Technology, 9(5), 425-437.

Edwards, S. (1990). “Capital Flows, Foreign Direct Investment, and Debt-equity Swaps in
Developing Countries”. NBER working paper 3197. National Bureau of Economic
Research, Cambridge, Massachusetts.

Efanga, U. O, Umoh, E. A and Etim, R. S. (2020) Tax Revenue and Economic Development in
Nigeria, an Auto-regressive Distributed Lag (ARDL) Model. Journal of Accounting and
Financial Management, 6(1), 95-10.
Hansson, A., and Olofsdotter, K. (2010).Tax Differences and Foreign Direct Investment in the
EU27 (Working paper). SWOPEC

Holger, O. and Greenaway, D. (2004). “On whether Domestic Firms benefit from Foreign Direct
Investment,” The World Bank Research Observer (19) 171-197.

John, E. I. (2016). Effect of Foreign Direct Investment on Economic Growth in Nigeria. European
Business and Management, 2(2), 40 – 46.

Kersan-Skabic, I., and Mirkovic, M. (2015). The Importance of Corporate Taxation for FDI
Attractiveness of Southeast European Countries, Panoeconomicus, 62(1), 105 – 122.

Kiabel, B.D., and Nwokah, N.G (2009). Boosting Revenue Generation by State Governments in
Nigeria: The tax Consultants’ Option Revisited. European Journal of Social Sciences, 8(4),
pp. 532-539.

Kiburi, W. W., Mirie, M. W., Okiro, K. O., and Ruigu, G. M. (2017). The Relationship between
Tax Burden and Foreign Direct Investment Inflows: A Review of Empirical Literature.
European Journal of Accounting, Auditing and Finance Research, 5(5), 67 – 77.

Koojaroenprasit, S (2012). The Impact of Foreign Direct Investment on Economic Growth: A Case
of South Korea. International Journal of Business and Social Science, 3(21).

Kubicova, J. (2013). The Role of Corporate Income Tax in Foreign Direct Investment Inflows into
the 'Old' and 'New' U. Member States. Research Project VEGA, 1(13), 222-233.

Kwaji, S. F., and Dabari, I. J. (2017). Empirical Analysis of Tax Revenue Collection by the Federal
Perception and Rcali. The Hague: FONDAD.
Ndagi, M. (2016). An Appraisal of Taxation and its Legal Effects on Foreign Direct Investment in
Nigeria. A Ph.D Thesis Submitted to School of Post Graduate Studies, Ahmadu Bello
University, Zaria.

Ndajiwo, M. (2018). Are Tax Incentives in Nigeria Attracting Investment or Giving Away
Revenue? Retrieved from https://www.taxjustice.net/2018/08. [Accessed, 7th March, 2019].

Ngowi, H. P. (2001). Attracting New Foreign Direct Investments to Tanzania: Tanzania Journal:
1(2): 23-39.
Olaleye, M. O., Riro, G. K., and Memba, F. S. (2016). Effect of Reduced Company Income Tax
Incentives on Foreign Direct Investment in listed Nigerian Manufacturing Companies.
European Journal of Business, Economics and Accountancy, 4(1), 39-54.

Olaniyi, T. A., Ajayi, R. O., and Oyedokun, G. E. (2018). Tax Policy Incentives and Foreign Direct
Investment in Nigeria. Fountain University Osogbo Journal of Management, 3(3), 59-71.

Olokoyo, F. O. (2012). Foreign Direct Investment and Economic Growth: A Case Study of
Nigeria. BVIMSR’s Journal of Management Research 4(1)2012.
Philip, A.O. (1991) Formulation of Effective Tax Policy. Paper presented at a National Workshop
on the Nigeria Tax System and Administration in Nigeria, Lagos, 15-17 May.

Pigato, M. (2001). “The Foreign Direct Investment Environment in Africa”. Africa Region
working paper 15. The World Bank, Washington, D.C.
PwC.
(2018).
Nigeria
Corporate
Tax
Credits
and
Incentives.
Retrieved
from
www.taxsummaries.pwc.com/ID/Nigeria-Corporate-Tax-credits-and-incentives. [Accessed
31st March, 2019].

Rapahel, S. E., Jeremiah, A. S. and Jerimiah, O. O. (2019). Attracting Foreign Direct Investment
(FDI) in Nigeria through Effective Tax Policy Incentives. International Journal of Applied
Economics, Finance and Accounting, 4(2), 36-44.

Tsai. P. (1994). “Determinants of Foreign Direct Investment and its Impact on Economic Growth”.
Journal of Economic Development, (19):137-63.

Ugwu, J. I. (2018). Tax Incentives and Foreign Direct Investment (FDI): Implication for Export
Promotion in Nigeria, Ghana and South Africa, Post IFRS Adoption. International Journal
in Management and Social Science, 6(9), 31-52.

UNCTAD. (1999). World Investment Report 1999: Foreign Direct Investment and the Challenge
of Development. New York and Geneva: United Nations Conference on Trade and
Development.

DOWNLOAD PDF

---

Back