Munich Personal RePEc Archive

Tax Revenue, Infrastructural Development and Economic Growth In Nigeria.

Ayeni, Oluwasegun David and Afolabi, Olarewaju Joseph (2020): Tax Revenue, Infrastructural Development and Economic Growth In Nigeria.

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Abstract

Extant literatures have found that tax revenue influence infrastructure and economic growth without considering if infrastructure can possibly affect the tax revenue collected. This study examined the dynamic relationship between tax revenue, infrastructural development and economic growth in Nigeria, using an annual secondary time series data from 1981 – 2018. The unit root properties of the series were examined using both Augmented Dickey Fuller (ADF) test and Phillip Perron (PP) test, while the Johansen Cointegration test was employed to examine if the series are cointegrated. The results reveal that the series are all integrated of order 1 and non cointegrated. To examine the direction of causality and the interrelationship among the variables, a vector autoregression (VAR) causality test was carried out, and a VAR at-first difference model was estimated. The results reveal a unidirectional causality running from tax revenue to economic growth and from economic growth to infrastructure, while a bi-directional causality is found between tax revenue and infrastructural development. Findings from the impulse response results show that while tax revenue influences economic growth and infrastructure, infrastructure does not influence economic growth, but significantly influence tax revenue collected. The study recommends that government should better embrace fiscal responsibility by being more accountable to tax payers in terms of providing infrastructures of higher quality that can truly promote economic growth.

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