Tax Revenue and Economic Development in Nigeria

Abstract

This study examined the influence of tax revenue on economic development in Nigeria. The specific objectives of the study were to investigate the influence of total tax revenue on economic development; examine the influence of the government’s education expenditure on economic development, and investigate the impact of the government’s health expenditure on economic development in Nigeria. The study covered the period 1990 to 2022. The study adopted an Autoregressive Distributive Lag (ARDL) model which allows simultaneous estimation of the long-run and short-run effects of tax revenue on economic development in Nigeria. Empirical results revealed a positive and significant relationship between tax revenue and human development index; implying that tax revenue enhanced economic development in Nigeria within the period under study. Gross domestic product and health expenditure also stimulated economic development in Nigeria within the period under study. Government education expenditure had a negative but insignificant impact on economic development. The study concludes that tax revenue stimulated economic development in Nigeria within the period under study. Based on the findings of the study, it was recommended, among others, that the government should intensify efforts at generating more revenue from tax and channels towards promoting industrial activities that would in turn impact the welfare of the people and further stimulate economic development in Nigeria.