Value Added Tax and Economic Growth in Nigeria .
Abstract
This study examined the impact of Value Added Tax (VAT) on economic growth in Nigeria from 1990 to 2024. Motivated by Nigeria's heavy reliance on oil revenues and persistent fiscal challenges, the research investigated whether VAT could serve as a stable alternative revenue source to foster sustainable development. The specific objectives focused on measuring VAT's effects on Real GDP, per capita income, employment, investment, and government revenue. Using quantitative data from reliable sources including the Central Bank of Nigeria and the National Bureau of Statistics, the study employed the Autoregressive Distributed Lag (ARDL) model to analyze both short-run and long-run relationships between VAT and the selected economic indicators. The findings revealed that VAT significantly boosted Real GDP, per capita income, investment, and government revenue in both the short and long term. However, VAT showed no statistically significant effect on employment levels. Macroeconomic factors such as inflation and exchange rates were also found to influence VAT's effectiveness. The study concluded that VAT was a viable tool for enhancing economic growth and fiscal stability in Nigeria but failed to directly stimulate job creation. Recommendations included leveraging digital technology to improve VAT collection, simplifying compliance procedures for small businesses, and implementing complementary policies to ensure balanced and inclusive growth across all economic sectors. These measures were identified as crucial for maximizing VAT's contribution to Nigeria's development.
Keywords
– Value Added TaxEconomic GrowthReal GDPPer Capita Income
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