The nexus between taxation and Nigerian economic growth

Olufemi Samuel Adegboyo, Federal University Oye-Ekiti, Ekiti State, Nigeria
Abstract

This study investigates the relationship between taxation and economic growth in Nigeria between the periods of 1980 -2019. The study adopts the endogenous growth model as its theoretical framework. The study uses Vector Error Correction Model (VECM) and the Granger Causality estimation technique to analyze the data. The results reveal that company income tax and petroleum income tax hinder economic growth in Nigeria while personal income tax and value added tax promotes economic growth in Nigeria. The granger Causality result reveals that company income tax, value added tax and petroleum profit tax affects economic growth in Nigeria. The study recommends that government should focus more on VAT, which has no direct negative impact on company, rather enhance economic growth; also government should reduce the company income tax rate in order not to discourage investors vis-à-vis reducing company’s productivity, which can deteriorate economic growth, as reveled in the study. Furthermore, Government should diversify the economy and focus less on PPT because of the volatility nature of the oil sector and consequent unreliability in using it to project revenue and expenditure.

Keywords: Taxation, economic growth, endogenous growth model, Nigeria

Suggested citation:
Adegboyo, O.S. (2020). The nexus between taxation and Nigerian economic growth. Skyline Business Journal. 16(1), pp 55-67. DOI: https://doi.org/10.37383/SBJ160105 

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Notes on contributors
Olufemi Samuel Adegboyo, Federal University Oye-Ekiti, Ekiti State, Nigeria
Suggested citation
Adegboyo, O.S. (2020). The nexus between taxation and Nigerian economic growth. Skyline Business Journal. 16(1), pp 55-67. DOI: https://doi.org/10.37383/SBJ160105