Tax Revenue and Economic Development in Nigeria: A Disaggregated Analysis

Abstract

The objective of this study is to ascertain the relationship between tax revenue and economic development in Nigeria during the period 1994 -2016. Data were obtained from the Central Bank of Nigeria, Office of the Federal Inland Revenue Service and Annual Abstract of statistics of the National Bureau of Statistics. This study was based on time series data. The Augmented Dickey Fuller test, Multple linear regression, Multicollinearity test, Granger Causality test, Johansen cointegration test and Error correction model were employed in the analysis of the data. The findings of this study showed that tax revenue has a statistically significant relationship with infant mortality, labour force and gross fixed capital formation in Nigeria at 5% level of significance respectively. On the basis of the findings, it was recommended among others that since tax revenue has been proven to contribute to economic development in Nigeria, Government needs to increase its allocation to the priority sectors of the economy such as agriculture and industry in order improve on the welfare of the citizenry.