Effect of real sector output on tax revenue in Nigeria

Effect of real sector output on tax revenue in Nigeria

Author by Dr. Grace Ogundajo

Journal/Publisher: Fountain University Osogbo Journal Of Management (fuojm)

Volume/Edition: 4

Language: English

Pages: 112 - 125


Tax revenue has remained the most reliable and controllable source of revenue to governments all over the world. This is however not the case in Nigeria as tax revenue accounts for a small proportion of government revenue. This study therefore investigated the influence of real sector output on tax revenue in Nigeria. Ex-post facto research design was adopted using validated macro data obtained for the period 1981-2017. Various tests including descriptive statistics, trend analysis, and stationary tests using Augmented Dickey Fuller (ADF) test were conducted. The ARDL bound test was employed to determine the existence of long run relationship between the variables. The study concluded that real sector output, controlling for inflation rate and exchange rate, has significant positive influence on tax revenue generation in Nigeria (Adj. R2 = .603, F(33,3) = 417.033, p < .05). Furthermore, exchange rate and inflation rate had significant moderating effect on tax revenue in Nigeria. Also, the result of the granger causality test revealed non-existence of bi-directional relationship between real sector output and total tax revenue. The study recommended that government should intensify effort on stimulating growth in the real sector of the economy in order to achieve sustainable increase in tax revenue. In addition, government’s macroeconomic policies on exchange rate and inflation rate should be undertaken in a way to optimize tax revenue.

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