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Effect of Tax Revenue on Economic Growth in Nigeria Onukelobi, Peace Chinwe (PhD)

Okwuego, Sopuruchukwu Peace, Chidiebere, Jennifer Onyinyechukwu

Abstract

This study investigated the effect of tax revenue on economic growth in Nigeria, focusing on three key tax components: Value Added Tax (VAT), Company Income Tax (CIT), and Customs and Excise Duties (CED) over the period 2004–2024. Using an ex-post facto research design, the study employed time series data sourced from the Federal Inland Revenue Service, the National Bureau of Statistics, and other relevant publications. The Correlation Analysis and Ordinary Least Squares (OLS) regression technique were utilized to assess the impact of these tax revenues on Nigeria's Gross Domestic Product (GDP) growth. The findings revealed a mixed impact of tax revenues on economic growth. VAT and CIT exhibited negative coefficients, suggesting a potential adverse effect on GDP growth; however, these effects were statistically insignificant. In contrast, CED demonstrated a positive and significant relationship with GDP growth, indicating its potential as a more effective revenue source for stimulating economic expansion. The overall model explained 46.13% of the variance in GDP growth, with a significant F-statistic, affirming the collective impact of the tax variables on economic growth. Based on these findings, the study recommended reforms in VAT and CIT policies to enhance their contribution to economic growth, and called for improvements in the efficiency and transparency of customs and excise duties administration to maximize their positive impact. The study contributed to the knowledge by highlighting the differential impacts of tax components on economic growth and provided policy recommendations for optimizing tax revenue management in Nigeria.

Keywords

Taxation Company income tax(cit) Value added tax (vat) Customs excise

References

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