A Causal and Long-run Nexus Between Value Added Tax and Economic Growth of Nigeria (1994-2017)

Ubesie Madubuko Cyril; Igweonyia Obiageli Virginia; Ozo-Ubaka Chikaodili Julie

doi:doi:10.11648/j.ijfbr.20190506.13

| Peer-Reviewed

A Causal and Long-run Nexus Between Value Added Tax and Economic Growth of Nigeria (1994-2017)

Ubesie Madubuko Cyril, Igweonyia Obiageli Virginia, Ozo-Ubaka Chikaodili Julie

Published in International Journal of Finance and Banking Research (Volume 5, Issue 6)

Received: 19 August 2019 Accepted: 26 September 2019 Published: 5 November 2019

Views: Downloads:

Download PDF

Share This Article

Twitter
Linked In
Facebook

Abstract

This study empirically examined the causal and long-run relationships between taxation and economic growth of Nigeria. It spanned from 1994 to 2017 and utilized annual time series secondary data extracted from the Central Bank of Nigeria (CBN) statistical bulletin (2017) edition. Ex-post facto research design was adopted while the Vector Autoregressive (VAR) method of Pairwise Granger Causality test and Vector Error Correction Mechanism (VECM) were employed. Findings revealed a significant long-run and short-run influence of VAT and revenue on Nigerian Gross Domestic Product (GDP). However, the Granger causality test result showed thatgrowth in GDP drives VAT and revenue growth in Nigeria without a feedback. This implies that taxes and tax revenue are substantial for the sustainable growth of Nigerian economy. However, if more goods and services are taxed, the revenue base of the country will increase. Based on these findings, it was recommended among other that the monoproduct economy of Nigeria should be diversified along the line of taxation since there exists a directional relationship between taxation and economic growth in Nigeria. Individuals and organizations should pay up their taxes while revenue generated from these taxes should be appropriately utilized for the good of citizens and as well growth of the economy.

Published in	International Journal of Finance and Banking Research (Volume 5, Issue 6)
DOI	10.11648/j.ijfbr.20190506.13
Page(s)	145-153
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2019. Published by Science Publishing Group

Keywords

Taxation, Economic Growth, Revenue, Vector Error Correction, Granger Causality

References

[1]	Anyanwu, J. C. (2013). Monetary Economics: Theory, Policy and Institutions. Onitsha: Hybrid Publishers.
[2]	Matthew, A. A. (2014). The impact of tax revenue on Nigerian economy: A case study of federal board of Inland Revenue (FBIS). Journal of Policy and Development Studies, 9 (1), 109-121.
[3]	Appah, E. (2010). The problems of tax planning and administration in Nigeria: The Federal and State Governments experience. International Journal of Labour and Organizational Psychology, 4, 1-14.
[4]	Nmesirionye, J. A., Jones, E. & Onuche, E. V. S. (2019). Empirical analysis of the impact of fiscal policy on economic growth of Nigeria. European Journal of Accounting, Finance and Investment, 5 (4), 32-41.
[5]	Igweonyia, O. V. (2011). The analysis of value added tax and its impact on the Nigeria economy. MBA Dissertation: University of Nigeria, Enugu campus (pp. 1-109)
[6]	Ajakaiye, O. D. (2000). Macroeconomic effect of VAT in Nigeria: A computable, general equilibrium analysis. Published by African Economic Research Consortium, 1-24.
[7]	Manukaji, I. J. & Nwadialor, E. O. (2016). Assessment of the contribution of value added tax to the Nigerian economy. International Journal of Social Sciences and Management Research, 2 (1), 45-56.
[8]	Azubike, J. U. B. (2009). Challenges of tax authorities, tax payers in the management of tax reform processes. Nigeria Account, 42, 36-42.
[9]	Onaolapo, A. A., Aworemi, R. J. & Ajala, O. A. (2013). Assessment of value added tax and its effects on revenue generation in Nigeria. International Journal of Business and Social Science, 4 (1), 220-225.
[10]	Ayodele Odusola (2006). Tax Policy Reform in Nigeria. World Institute for Development Economics Research. Research Paper No 2006/03.
[11]	Taiwo I. O. (2008). Performance of Government Revenue. Achieving Optimal Structure “Paper Presented at the National Assembly Retreat on Restructuring the National Budget for members of the Appropriations, Finance and Public Accounts Committee, Kaduna 10-11 July, 2008.
[12]	Ekeocha, P., Malolu, C. &Onyema, O. (2012). Revenue implication of Nigeria tax system. Journal of Economic and Sustainable Development, 3 (8).
[13]	Knut Wicksell (1896). Financial Theory Studies (Finanztheoretische Untersuchungen) (Jena, Germany).
[14]	Erik Lindahl (1919). The Justice Taxation (Die Gerechtigkeit Besteuerung) (Lund, Sweden)
[15]	Umeora, C. E. (2013). The effects of value added tax (VAT) on the economic growth of Nigeria. Journal of Economics and Sustainable Development, 4 (6), 53-65.
[16]	Okoye, E. I. & Gbegi, D. O. (2013). Effective value added tax: An imperative for wealth creation in Nigeria. SSRN Electronic Journal, 1-29.
[17]	Ojong, C. M., Anthony, O. & Arikpo, O. F. (2016). The impact of tax revenue on economic growth: Evidence from Nigeria. IOSR Journal of Economics and Finance (IOSR-JEF), 7 (1), 32-38.
[18]	Okafor, R. G. (2012). Tax revenue generation and Nigerian economic development. European Journal of Business and Management, 4 (19), 49-57.
[19]	Adereti, S. A., Adesina, J. A. & Sanni, M. R. (2011). Value added tax and economic growth of Nigeria. European Journal of Humanities and Social Sciences, 10 (1), 455-471.
[20]	Akwe, J. A. (2014). Impact of non-oil tax revenue on economic growth: The Nigerian perspective. International Journal of Finance and Accounting, 3 (5), 303-309.
[21]	Ebimobowei, A. & Ogbonna, G. N. (2012). Petroleum profit tax and economic growth: Cointegration evidence from Nigeria. Asian Journal of Business Management, 4 (3), 267-274.
[22]	Gylych, J., Samira, A. & Abdurrahman, I. (2016). The impact of tax reforms and economic growth of Nigeria. The Empirical Economics Letters, 15 (5), 30-40.
[23]	Izedonmi, F. I. O. & Okunbor, J. A. (2014). The roles of value added tax in the economic growth of Nigeria. British Journal of Economics, Management & Trade, 4 (12), 2000-2007.
[24]	Onyele, K. O. & Nwokoacha, E. B. (2016). Sources of public funds and economic prosperity: The Nigerian case. Journal of Business and Financial Affairs, 5 (4), 1-11.
[25]	Adeniyi, A. R. (2012). The effect of tax administration on revenue generation in Enugu State: A case study of the state board of internal revenue Enugu State. Faculty of Management and Social Sciences, Caritas University Amorji–Nike Enugu State.
[26]	Ayuba, A. J. (2014). Impact of non-oil tax revenue on economic growth: The Nigerian perspective. International Journal of Finance and Accounting, 3, 303-309.
[27]	Ayinde, K., Kuranga, J., & Lukman, F. A. (2015). Modeling Nigerian government expenditure, revenue and economic growth: Co-integration, error correction mechanism and combined estimators analysis approach. Asian Economic and Financial Review, 5, 858-867.
[28]	Okwara, C. C. & Amori, O. M. (2017). Impact of tax revenue on economic growth in Nigeria. International Journal of Scientific Research in Social Sciences & Management Studies(IJSRSSMS), 2 (2), 90-102.
[29]	Branimir, K., Ivan, M., Milos, P., Jelena, A. & Nada, M. (2017). The impact of tax forms on economic growth-Evidence from Serbia. Original Scientific Paper, 113-125.
[30]	Nwadialor, E. & Ekezie, C. A. (2016). Effect of tax policy on economic growth in Nigeria. International Journal of Business Administration, 7 (1), 50-58.
[31]	Jina, K. G., Lawrence, M. D. & Bezum, D. Y. (2017). Impact of petroleum profits tax on economic growth in Nigeria: A longitudinal study. Tax Academy Research Journal (TARJ), 1 (1), 139-150.
[32]	Abata, M. A. (2014). The impact of tax revenue on Nigerian economy. Journal of Policy and Development Studies, 9 (1), 109-121.
[33]	Akintoye, I. R. & Tashie, G. A. (2013). The effect of tax compliance on economic growth and development in Nigeria, West-Africa. British Journal of Arts and Social Sciences, 2 (2), 222-231.
[34]	Kanghua, Z. & Shan, L. (2013). The impact of economic growth and tax reform on tax revenue and structure: Evidence from China experience. Modern Economy, 4, 839-851.
[35]	John, C. O. & Suleiman, A. S. A. (2014). Value added tax and economic growth in Nigeria. European Journal of Accounting Auditing and Finance Research, 2 (8), 62-69.
[36]	Adeyemo, K. A. (2017). Assessing the ‘value’ in value added tax: Evidence from Nigerian economy. Journal of Internet Banking and Commerce, 22 (7), 1-15.
[37]	Nasiru, M. G, Haruna, M. A. & Abdullahi, M. A. (2016). Evaluating the impact of value added tax on the economic growth of Nigeria. Journal of Accounting and Taxation, 8 (6), 59-65.
[38]	Inyiama, O. I. &Ubesie, M. C. (2016). Effect of value added tax, customs and excise duties on Nigeria economic growth. International Journal of Managerial Studies and Research, 4 (10), 53-62.

Cite This Article

Plain Text BibTeX RIS

APA Style

Ubesie Madubuko Cyril, Igweonyia Obiageli Virginia, Ozo-Ubaka Chikaodili Julie. (2019). A Causal and Long-run Nexus Between Value Added Tax and Economic Growth of Nigeria (1994-2017). International Journal of Finance and Banking Research, 5(6), 145-153. https://doi.org/10.11648/j.ijfbr.20190506.13

Copy | Download

ACS Style

Ubesie Madubuko Cyril; Igweonyia Obiageli Virginia; Ozo-Ubaka Chikaodili Julie. A Causal and Long-run Nexus Between Value Added Tax and Economic Growth of Nigeria (1994-2017). Int. J. Finance Bank. Res. 2019, 5(6), 145-153. doi: 10.11648/j.ijfbr.20190506.13

Copy | Download

AMA Style

Ubesie Madubuko Cyril, Igweonyia Obiageli Virginia, Ozo-Ubaka Chikaodili Julie. A Causal and Long-run Nexus Between Value Added Tax and Economic Growth of Nigeria (1994-2017). Int J Finance Bank Res. 2019;5(6):145-153. doi: 10.11648/j.ijfbr.20190506.13

Copy | Download

@article{10.11648/j.ijfbr.20190506.13,
  author = {Ubesie Madubuko Cyril and Igweonyia Obiageli Virginia and Ozo-Ubaka Chikaodili Julie},
  title = {A Causal and Long-run Nexus Between Value Added Tax and Economic Growth of Nigeria (1994-2017)},
  journal = {International Journal of Finance and Banking Research},
  volume = {5},
  number = {6},
  pages = {145-153},
  doi = {10.11648/j.ijfbr.20190506.13},
  url = {https://doi.org/10.11648/j.ijfbr.20190506.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20190506.13},
  abstract = {This study empirically examined the causal and long-run relationships between taxation and economic growth of Nigeria. It spanned from 1994 to 2017 and utilized annual time series secondary data extracted from the Central Bank of Nigeria (CBN) statistical bulletin (2017) edition. Ex-post facto research design was adopted while the Vector Autoregressive (VAR) method of Pairwise Granger Causality test and Vector Error Correction Mechanism (VECM) were employed. Findings revealed a significant long-run and short-run influence of VAT and revenue on Nigerian Gross Domestic Product (GDP). However, the Granger causality test result showed thatgrowth in GDP drives VAT and revenue growth in Nigeria without a feedback. This implies that taxes and tax revenue are substantial for the sustainable growth of Nigerian economy. However, if more goods and services are taxed, the revenue base of the country will increase. Based on these findings, it was recommended among other that the monoproduct economy of Nigeria should be diversified along the line of taxation since there exists a directional relationship between taxation and economic growth in Nigeria. Individuals and organizations should pay up their taxes while revenue generated from these taxes should be appropriately utilized for the good of citizens and as well growth of the economy.},
 year = {2019}
}

Copy | Download

TY  - JOUR
T1  - A Causal and Long-run Nexus Between Value Added Tax and Economic Growth of Nigeria (1994-2017)
AU  - Ubesie Madubuko Cyril
AU  - Igweonyia Obiageli Virginia
AU  - Ozo-Ubaka Chikaodili Julie
Y1  - 2019/11/05
PY  - 2019
N1  - https://doi.org/10.11648/j.ijfbr.20190506.13
DO  - 10.11648/j.ijfbr.20190506.13
T2  - International Journal of Finance and Banking Research
JF  - International Journal of Finance and Banking Research
JO  - International Journal of Finance and Banking Research
SP  - 145
EP  - 153
PB  - Science Publishing Group
SN  - 2472-2278
UR  - https://doi.org/10.11648/j.ijfbr.20190506.13
AB  - This study empirically examined the causal and long-run relationships between taxation and economic growth of Nigeria. It spanned from 1994 to 2017 and utilized annual time series secondary data extracted from the Central Bank of Nigeria (CBN) statistical bulletin (2017) edition. Ex-post facto research design was adopted while the Vector Autoregressive (VAR) method of Pairwise Granger Causality test and Vector Error Correction Mechanism (VECM) were employed. Findings revealed a significant long-run and short-run influence of VAT and revenue on Nigerian Gross Domestic Product (GDP). However, the Granger causality test result showed thatgrowth in GDP drives VAT and revenue growth in Nigeria without a feedback. This implies that taxes and tax revenue are substantial for the sustainable growth of Nigerian economy. However, if more goods and services are taxed, the revenue base of the country will increase. Based on these findings, it was recommended among other that the monoproduct economy of Nigeria should be diversified along the line of taxation since there exists a directional relationship between taxation and economic growth in Nigeria. Individuals and organizations should pay up their taxes while revenue generated from these taxes should be appropriately utilized for the good of citizens and as well growth of the economy.
VL  - 5
IS  - 6
ER  -

Copy | Download

Author Information

Ubesie Madubuko Cyril

Department of Accountancy, Enugu State University of Science and Technology (ESUT), Enugu, Nigeria
Igweonyia Obiageli Virginia

Department of Accountancy, Enugu State University of Science and Technology (ESUT), Enugu, Nigeria
Ozo-Ubaka Chikaodili Julie

Department of Accountancy, Enugu State University of Science and Technology (ESUT), Enugu, Nigeria

Download PDF

Sections

Plain Text BibTeX RIS

APA Style

Ubesie Madubuko Cyril, Igweonyia Obiageli Virginia, Ozo-Ubaka Chikaodili Julie. (2019). A Causal and Long-run Nexus Between Value Added Tax and Economic Growth of Nigeria (1994-2017). International Journal of Finance and Banking Research, 5(6), 145-153. https://doi.org/10.11648/j.ijfbr.20190506.13

Copy | Download

ACS Style

Ubesie Madubuko Cyril; Igweonyia Obiageli Virginia; Ozo-Ubaka Chikaodili Julie. A Causal and Long-run Nexus Between Value Added Tax and Economic Growth of Nigeria (1994-2017). Int. J. Finance Bank. Res. 2019, 5(6), 145-153. doi: 10.11648/j.ijfbr.20190506.13

Copy | Download

AMA Style

Ubesie Madubuko Cyril, Igweonyia Obiageli Virginia, Ozo-Ubaka Chikaodili Julie. A Causal and Long-run Nexus Between Value Added Tax and Economic Growth of Nigeria (1994-2017). Int J Finance Bank Res. 2019;5(6):145-153. doi: 10.11648/j.ijfbr.20190506.13

Copy | Download

@article{10.11648/j.ijfbr.20190506.13,
  author = {Ubesie Madubuko Cyril and Igweonyia Obiageli Virginia and Ozo-Ubaka Chikaodili Julie},
  title = {A Causal and Long-run Nexus Between Value Added Tax and Economic Growth of Nigeria (1994-2017)},
  journal = {International Journal of Finance and Banking Research},
  volume = {5},
  number = {6},
  pages = {145-153},
  doi = {10.11648/j.ijfbr.20190506.13},
  url = {https://doi.org/10.11648/j.ijfbr.20190506.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20190506.13},
  abstract = {This study empirically examined the causal and long-run relationships between taxation and economic growth of Nigeria. It spanned from 1994 to 2017 and utilized annual time series secondary data extracted from the Central Bank of Nigeria (CBN) statistical bulletin (2017) edition. Ex-post facto research design was adopted while the Vector Autoregressive (VAR) method of Pairwise Granger Causality test and Vector Error Correction Mechanism (VECM) were employed. Findings revealed a significant long-run and short-run influence of VAT and revenue on Nigerian Gross Domestic Product (GDP). However, the Granger causality test result showed thatgrowth in GDP drives VAT and revenue growth in Nigeria without a feedback. This implies that taxes and tax revenue are substantial for the sustainable growth of Nigerian economy. However, if more goods and services are taxed, the revenue base of the country will increase. Based on these findings, it was recommended among other that the monoproduct economy of Nigeria should be diversified along the line of taxation since there exists a directional relationship between taxation and economic growth in Nigeria. Individuals and organizations should pay up their taxes while revenue generated from these taxes should be appropriately utilized for the good of citizens and as well growth of the economy.},
 year = {2019}
}

Copy | Download

TY  - JOUR
T1  - A Causal and Long-run Nexus Between Value Added Tax and Economic Growth of Nigeria (1994-2017)
AU  - Ubesie Madubuko Cyril
AU  - Igweonyia Obiageli Virginia
AU  - Ozo-Ubaka Chikaodili Julie
Y1  - 2019/11/05
PY  - 2019
N1  - https://doi.org/10.11648/j.ijfbr.20190506.13
DO  - 10.11648/j.ijfbr.20190506.13
T2  - International Journal of Finance and Banking Research
JF  - International Journal of Finance and Banking Research
JO  - International Journal of Finance and Banking Research
SP  - 145
EP  - 153
PB  - Science Publishing Group
SN  - 2472-2278
UR  - https://doi.org/10.11648/j.ijfbr.20190506.13
AB  - This study empirically examined the causal and long-run relationships between taxation and economic growth of Nigeria. It spanned from 1994 to 2017 and utilized annual time series secondary data extracted from the Central Bank of Nigeria (CBN) statistical bulletin (2017) edition. Ex-post facto research design was adopted while the Vector Autoregressive (VAR) method of Pairwise Granger Causality test and Vector Error Correction Mechanism (VECM) were employed. Findings revealed a significant long-run and short-run influence of VAT and revenue on Nigerian Gross Domestic Product (GDP). However, the Granger causality test result showed thatgrowth in GDP drives VAT and revenue growth in Nigeria without a feedback. This implies that taxes and tax revenue are substantial for the sustainable growth of Nigerian economy. However, if more goods and services are taxed, the revenue base of the country will increase. Based on these findings, it was recommended among other that the monoproduct economy of Nigeria should be diversified along the line of taxation since there exists a directional relationship between taxation and economic growth in Nigeria. Individuals and organizations should pay up their taxes while revenue generated from these taxes should be appropriately utilized for the good of citizens and as well growth of the economy.
VL  - 5
IS  - 6
ER  -

Copy | Download