The impact of tax revenue on economic growth in Nigeria

Abstract

This research aimed to investigate the influence of tax revenue on Nigeria's economic growth over a three-decade period spanning from 1991 to 2021. The tax data was collected from the Federal Internal Revenue Service (FIRS) and the Nigerian Bureau of Statistics (NBS), while economic data for Nigeria was sourced from the 2021 Statistical Bulletin of the Central Bank of Nigeria (CBN). The study utilized personal income tax (PIT), corporate income tax (CIT), and value-added tax (VAT) as proxies for tax revenue, with gross domestic product (GDP) serving as the dependent variable to represent the Nigerian economy. Several diagnostic tests were conducted, including a descriptive statistic to assess data normality and the Augmented Dickey-Fuller unit root test to evaluate data stability. The Autoregressive Distributed Lag (ARDL) technique was employed as the statistical tool for data analysis, utilizing E-View version 9 as the statistical package. The findings from the ARDL test revealed that personal income tax (PIT) and value-added tax (VAT) had a negative impact on GDP, while company income tax (CIT) showed a positive impact. As a result, the study concluded that tax revenue exhibits a positive and significant correlation with the growth of the Nigerian economy. The study suggests that governments and relevant tax authorities should focus on increasing taxes as a revenue source and target sectors that drive economic growth.