Impact of Tax Incentives on Foreign Direct Investment Flow in Nigeria

Abstract

The growing pace of the globalisation process has triggered economic development, especially among developing nations. One of the immediate responses to this phenomenon is the increasing trend of Foreign Direct Investment flows among countries driven by some factors. This paper aimed at determining the impact of tax incentives (tax holiday and custom duty exemption) on Foreign Direct Investment inflow into Nigeria over the period 2008-2018. Using secondary data obtained from the Nigerian Investment Promotion Commission, Central Bank of Nigeria and Nigerian Customs Service, Driscoll-Kraay Standard Errors regression analysis was used via STATA version 14 to test the research hypothesis. The study's findings revealed that tax incentive has a positive and significant impact on Foreign Direct Investment inflow. Specifically, tax holiday has significant positive effect on FDI at 5% level of significance (β=0.1578; t=3.99; p<0.05) while custom duties exemption reported significant positive effect on FDI at 1% level of significance (β=0.2436; t=5.61; p<0.01). It is recommended that the government maintain and strengthen its policies on tax holidays and customs duties exemption to improve Foreign Direct Investment inflow, thereby developing the national economy.

Penentu Foreign Direct Investment di Provinsi Kalimantan

“…Foreign Direct Investment (FDI) ialah salah satu sarana bagi sebuah negara asal (home country) memindahkan modalnya ke negara tujuan (host country) dengan maksud mencapai efisiensi biaya produksi melalui biaya tenaga kerja yang lebih murah, maupun menjangkau pangsa pasar yang lebih besar (Dewi & Hutomo, 2021). FDI telah dianggap sebagai sumber pembiayaan yang potensial bagi pertumbuhan dan perkembangan negara maju dan berkembang (Ibrahim et al, 2022). Beberapa tahun belakangan ini telah banyak penelitian yang menunjukkan dampak positif Foreign Direct Investment (FDI) terhadap pertumbuhan ekonomi suatu negara.…”