Synergizing Digital Financial Inclusion and Tax Revenue for Inclusive Economic Well-Being in Nigeria

Abstract

Nigeria’s evolving digital economy presents new opportunities for inclusive development through digital financial inclusion (DFI) and improved tax revenue mobilization. While digital technologies enhance efficiency in tax administration, they also create challenges such as risks of exclusion and potential over-taxation. This study investigates the interactive effect of DFI and tax revenue on economic well-being in Nigeria, filling a key gap in empirical literature. Using annual data from 2000 to 2023 sourced from the World Bank and Global Findex, the study applies the Autoregressive Distributed Lag (ARDL) model to capture short- and long-run dynamics. DFI is measured through indicators of access, usage, and availability, while tax revenue is represented by tax-to-GDP ratio, direct and indirect collections, and efficiency measures. Economic well-being is proxied by a composite index covering income, employment, and living standards. Findings reveal that while DFI and tax revenue positively influence well-being in the long run, their interaction produces a negative effect when tax burdens rise excessively, thereby undermining the benefits of inclusion. The results highlight the importance of balanced fiscal and digital policies that foster equity, avoid regressive digital taxation, and ensure that financial access translates into real welfare gains. This study offers practical insights for Nigeria’s pursuit of the Sustainable Development Goals (SDGs), particularly poverty reduction, decent work, and reduced inequality.