Effect of tax revenue on economic development in Nigeria

This study examined tax revenue on economic development in Nigeria for a period of 31years, 1993-2023. To achieve this objective, Human Development Index (HDI) served as the dependent variable for this study proxy for economic development, while company income tax (CIT), petroleum profit tax (PPT), personal income tax (PIT), value added tax (VAT), education tax (EDT) and customs and excise duties (CED) served as the independent variables (explanatory variables). Ex-post-facto research design was utilized for this study. Data used were sourced from the United Nations Development Programme (UNDP), Central Bank of Nigeria (CBN) Statistical Bulletin, Central Bank of Nigeria Economic and Annual Report Account, Federal Inland Revenue Service (FIRS), the Federal Reserve Bank of St. Louis, and the World Bank Database Descriptive statistics, Phillips-Perron (PPT) Unit root test, Johansen Co-integration, Granger causality and Vector Autoregressive model (VAR) were the analytical tools for this study. The results revealed that some variables of tax revenue indicators have significant effect; while others have no significant effect on economic development indicators. The variables were normally distributed, and there was a causal relationship between tax revenue indicators and economic development. There exist a long-run relationship between tax revenue indicators and economic development. The Vector Autoregressive results show that tax revenue indicators were statistically significant with HDI. The study concluded that tax revenue indicators had various levels of interaction with economic development index measured in this study with greater outcome indicating positive and significant effect. The study recommended that tax revenue should be spent wisely to fund essential services like affordable housing, good roads, clean water, a reliable electrical supply, education, and basic healthcare. This would encourage the growth of numerous economic sectors, hence boosting economic growth and development. This study contributed to the body of knowledge by extending the scope of existing literature to 2023. Keywords: Tax Revenue, Economic Development, Human Development Index, Company Income Tax, Petroleum Profit Tax, Personal Income Tax And Value Added Tax.