Taxation and National Development – Contribution of VAT to Nigeria’s Income Generating Capabilities

Onwuka; Onwuka Okwara (Ph.D); Aruomah Obinwanne Kelechukwu PhD; Mbanasor Christian PhD

doi:10.56201/jafm.vol.11.no7.2025.pg313.335

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Taxation and National Development – Contribution of VAT to Nigeria’s Income Generating Capabilities

Onwuka, Onwuka Okwara (Ph.D), Aruomah Obinwanne Kelechukwu PhD, Mbanasor Christian PhD

Abstract

The study was on Taxation and National Development and the contributions of VAT to Nigeria’s income generating abilities. The problem under study was that Nigeria’s over-reliance on oil revenue has led to economic instability and vulnerability to global market fluctuations. The Country’s tax system, particularly Value Added Tax (VAT) has been identified as a potential solution to diversify revenue streams and promote national development. However, the contribution of VAT to Nigeria’s income generating capabilities remain unclear. The objectives were to establish the contribution of VAT to the total tax revenue on one hand and to determine it’s impact on economic growth on the other. The granger causality tests employed indicated that the variables were not bidirectional means there were no endogeneity and no complexity which is why Vector Autoregression analysis was not needed. In testing for the unit root, it is evident that given the significant t-statistics and stable coefficients, the null hypotheses of the unit root for both null hypotheses were rejected. This means that the all variables are stationary series which is why it there were no spurious regression or non-stationarity. The coefficients are stable, indicating a stationary process. The standard error of regression is low indicating a good fit. The Mu values suggest stable means. The significant values for R2 and adjusted R2 for the both hypotheses indicates that the regression lines approximate the real data points and so is a very good fit. The coefficient of determination R2 in this case provides a measure of how well observed outcomes in the analyses are replicated by the model. In other words most of the variations in the total tax revenue and GDP can be explained by changes in the VAT revenue for the years under study. Given the pre- dominance of taxes as the second major income earner in the country it stands to reason that VAT would continue to play and

Keywords

TaxationNational DevelopmentVatNigeriaIncoming Generating Capabilities

References

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Taxation and National Development – Contribution of VAT to Nigeria’s Income Generating Capabilities

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