Tax Laws and Economic Growth in Nigeria: An Empirical Analysis from 2000 to 2023

Abstract

This study examines the effect of tax laws on economic growth in Nigeria from 2000 to 2023, focusing on Petroleum Profit Tax (PPT), Companies Income Tax (CIT), Value Added Tax (VAT), and Capital Gains Tax (CGT). Utilizing an ex-post facto design and employing Panel Least Squares Regression, the research analyzed secondary data sourced from the Central Bank of Nigeria, Federal Inland Revenue Service, and National Bureau of Statistics. Results indicate that VAT and CIT significantly and positively influence Nigeria’s Gross Domestic Product (GDP), with VAT demonstrating a notably stronger effect (β = 66.50, p < 0.01) compared to CIT (β = 19.98, p < 0.05). Conversely, PPT and CGT exhibited positive but statistically insignificant effects on economic growth. Pearson’s correlation analysis reinforced these findings, showing strong positive associations between GDP and VAT (r = 0.9821) and CIT (r = 0.9602), moderate correlation with PPT (r = 0.6207), and weak correlation with CGT (r = 0.2571). Theoretically, the outcomes align with the Endogenous Growth Theory, emphasizing the role of internal fiscal mechanisms, and Benefit Received Theory, highlighting taxpayer-government reciprocity. The study underscores critical gaps in Nigeria's tax administration, particularly in managing petroleum revenue volatility and CGT compliance challenges. Thus, it recommends enhanced tax governance, improved transparency, and strategic reinvestment of tax revenues to bolster economic resilience and sustainability. The research empirically contributes to optimize fiscal strategies for sustained economic growth.