FEDERAL REVENUE TAX RELEVANCE AND ECONOMIC PERFORMANCE EFFECT

Abstract

This study examined the relevance and effect of federal tax revenue on economic performance in Nigeria over the period 1994–2025. Specifically, the study examined the effects of Customs and Excise Duties (CED), Value Added Tax (VAT) and Petroleum Profit Tax (PPT) on Real Gross Domestic Product (RGDP). An ex-post facto research design was adopted, while annual secondary data were obtained from the Central Bank of Nigeria Statistical Bulletin and TaxPro Max. The study employed the Autoregressive Distributed Lag (ARDL) technique to examine the dynamic relationship among the variables. The Augmented Dickey-Fuller unit root test revealed mixed stationarity properties, providing a basis for the ARDL approach, subject to the absence of variables integrated of order two. The Akaike Information Criterion selected ARDL(2,1,2,3) as the optimal specification. The ARDL bounds test produced an F-statistic of 4.137, which was above the 5% lower-bound critical value of 3.23 but below the upper-bound value of 4.35, resulting in an inconclusive decision regarding long-run cointegration at the 5% level. The conditional long-run estimates showed negative coefficients for CED and VAT and a positive coefficient for PPT, but none was statistically significant at the 5% level. The study therefore concludes that the available evidence does not establish statistically significant long-run effects of the selected federal tax revenue components on economic performance during the study period. The study recommends improved tax administration, broader revenue mobilisation, transparency in the utilisation of tax proceeds and greater diversification of government revenue sources.