ROLE OF REVENUE CONTRIBUTIONS TO ECONOMIC GROWTH IN NIGERIA: 1994 – 2022

Abstract

This research examines the relationship between revenue components and economic growth in Nigeria, using annual data from 1994 to 2022. The study investigates the impact of key variables such as oil prices (OILP), inflation (INF), petroleum profit tax (PPT), value-added tax (VAT), other taxes (OTH), and total tax revenue (TTX) on GDP growth, employing an Autoregressive Distributed Lag (ARDL) model to analyze both short-run and long-run dynamics. The findings reveal a significant positive relationship between oil prices and economic growth, with a coefficient of 0.110. In contrast, total tax revenue (TTX) has a negative long-run effect on GDP growth, with a coefficient of -0.001. Among the short-run dynamics, other taxes (OTH) exhibit a positive and statistically significant effect, with a coefficient of 0.010. The error correction term (ECT) of -0.567 indicates that approximately 56.7% of any short-term disequilibrium is corrected within one period, highlighting the stability of the model. The ARDL Bounds Test shows that there is a significant long-run relationship in the aggregated model (F-statistic = 4.98), while no such relationship is found in the disaggregated model (F-statistic = 2.57). Based on these results, the study recommends diversifying revenue sources, improving tax efficiency, reducing dependency on oil revenue, and implementing tax reforms to support long-term economic growth. These findings provide crucial insights for policymakers in Nigeria, particularly in terms of enhancing tax administration and fostering economic diversification.