Trade Openness and Tax Revenue Performance in Nigeria (1987-2016)

The Impact of Trade Openness on Trade and Tax Revenues in Nigeria (1981-2018)

“…The implication of this result is that as trade openness ratio increases, tax revenue collection will increase on a decreasing rate, and the difference might not be noticeable initially (shortrun), but over time (long-run), the impact will become obvious. This is the situation of most African countries presently especially Nigeria, and this result is in conformity with [9] and [8].…”

“…In the same vein, [8] indicate that considering the structural characteristics of less developed economies (LDC) economies, it is imperative to be cautious in presuming that what currently works in developed countries can easily be transferred to LDCs. Trade tax is dominant revenue base in Nigeria after oil export, and empirical studies showed a significant negative relationship of trade openness on tax performance in Nigeria [9]. However, the study did not indicate the tax handles responsible for the negative impact, and the dynamic relationship of the variables.…”

“…This study will show the effect both in the short and long run. It is paradoxical that despite implementing trade and economic reform policies, revenue performance shows that Nigeria is experiencing lower tax revenue performance [9], and this affects the government ability to fund infrastructure development projects, however, the study did not show through which tax handle trade openness impacts total tax revenue. Nigeria is the 8 th largest oil producing country in the world, 32 nd largest economy in the world [12].…”

“…However, this result was contradicted by [28], indicating that trade tax had fallen from one-third to one-quarter of total tax revenue between 1980s and 2005. In the same vein, [9] on trade openness and tax revenue performance in Nigeria (1987 to 2016) using OLS regression technique agree that trade openness is negatively related and significant with tax revenue performance, such that 1% increase in trade openness results in over N67.323million loss of tax revenue, thus attributing the reason to higher import duty rates in Nigeria compared to other countries. However, these studies did not indicate the effect of trade openness on other tax components and which tax revenue handle accounted for the impacts.…”

“…The model used in this research work is based on the assumption that total tax revenue is a derivative of trade openness. Adopting the approach by [1] and [9]. The functional form is indicated as TTR = f (TOP).…”