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Demographic Factors in the Prevalence of Transactional Sex Among Undergraduates in Ignatius Ajuru University of Education


This study examines the developmental impact of indirect tax on Nigeria economy. The study uses value added tax revenue and custom and excise duty revenue as independent variables and economic growth was proxy with real gross domestic product as the dependent variable. The study employ secondary data collected from Central Bank of Nigeria statistical bulletin for the period covering 2000 to 2020 for the empirical analysis using the convenient sampling techniques. The research design is time series and the data were analyzed using descriptive statistics, correlation, unit root test, co-integration test and error correction model regression. The result revealed that value added tax had a negative and significant impact on real gross domestic product. In the samevein, past custom and excise duty had a negative and weakly significant impact on real gross domestic product. The Error Correction Model (ECM (-1)) coefficient had a correct negative and statistically significant sign. This shows that short-run deviation can be quickly corrected. The Durbin-Watson positive value indicates the absence of autocorrelation in the model. The study therefore recommended that tax administrative loopholes should be plugged for tax revenue to contribute immensely to the development of the economy since past value added tax and custom and excise duty had a significant impact on economic growth.


Chapter one


1.1Background of the study

Taxation is a method of raising revenue for the day-to-day operations of government. Government actions include raising finances and using them to provide security, social amenities, infrastructure, and other services to the country’s citizens. As a result, it is important to recognize that the goal of taxes is aligned with the functions of government (Akhor, 2014). However, it has been noticed throughout time that the Nigerian tax system has intrinsic structural flaws. According to Odusola (2006), the Nigerian tax system focuses on the Petroleum Profit Tax (PPT) and Company Income Tax (CIT), whereas broad-based indirect taxes such as VAT and Customs and Excise Duty (CEXD) are ignored. As a result, the tax system lacks the flexibility to diversify the country’s revenue portfolio in order to protect against crude oil price volatility and promote fiscal sustainability and economic viability at lower levels of government (Azaiki & Shagari, 2007).

In Nigeria, revenues have been distributed using a formula recommended by Ad-hoc Fiscal Commissions or a principle established by the government. According to Taiwo (2008), thirteen income allocation Commissions have been established since 1946. Each Commission recommended a revenue-sharing formula based on the economic circumstances and goals that the government desired the revenue-sharing formula to serve. More specifically, revenues are obtained primarily through taxation to fund government spending and impact other economic activity. Furthermore, tax revenue mobilization as a means of supporting developmental initiatives in developing nations has proven problematic, owing to different forms of resistance, such as evasion, avoidance, and other corrupt practices that can easily be perpetuated within the direct tax bracket. These efforts are viewed as economic sabotage and are frequently cited as reasons for the country’s underdevelopment. Regardless of the prevailing ideology or political system of a particular nation, the government collects taxes in order to provide efficient and steadily expanding non-revenue yielding services such as infrastructure, education, health, communications, employment opportunities, and essential public services such as law and order enforcement. Taxation itself has profoundly good consequences in developing better and more responsible government (Tax Justice Network [TJN], 2008). (2012).

According to Akhor (2014), the economic implications of taxes include micro effects on income distribution and resource efficiency, as well as macro effects on capacity output, employment, pricing, and growth. As a result, due of the diminishing level of income generation, the employment of tax as a tool to accomplish economic growth in most developing countries is unreliable.

As a result, tax rates have been changed or fine-tuned to influence or attain macroeconomic stability. Canada, the United States, the Netherlands, and the United Kingdom are all instances of governments that have affected their economic development through tax income. They make a lot of money from VAT and import duties, and they’ve used it to grow their business (Oluba, 2008). Natural resource taxes account for a large portion of Africa’s increased tax revenue. Income from production sharing, royalties, and corporate income tax on oil and mining corporations were all included (Pfister, 2009). Nigeria is a developing country with crude oil as its primary export. Natural gas, tin, iron ore, coal, limestone, lead, zinc, and fertile land are among the various natural resources (Economy Watch, 2011). Most economists, particularly development and international economists, have argued that relying too heavily on direct tax revenue (e.g. PPT; due to oil price fluctuations; and CIT; due to sharp practices such as evasion, avoidance, and others that can easily be perpetrated) can harm a country’s economic growth and development (Okafor,2012).

Statement of the problem

In Nigeria, people, particularly the wealthy and elites, actively avoid their civic duty of paying tax and, on occasion, hire tax specialists to help them pay less tax to the government. There’s also the issue of lying about one’s age and the number of children and dependents in order to lower the amount of tax that must be paid. As a result of these reasons, subnational governments (state and municipal governments) argue that their current tax bases are inadequate, and hence accruable revenues are insufficient to satisfy their expenditure targets. In addition, due to a drop in GDP, the statutory allocation from the federation account has been badly inadequate. Given their expenditure patterns, this necessarily lowers their overall performance.

In Nigeria, according to Taiwo (2008), the distribution of government revenue is biased in favor of one tax basis or the other (e.g., oil revenue). Nonetheless, the overwhelming evidence of oil revenue’s positive impact on Nigeria’s economic progress cannot be overstated (Odusola, 2006). However, the first question is whether or not other types of taxation should be considered. As a result of the foregoing, some issues arise: what is the relationship between Nigeria’s tax revenue and its economic growth? What is the contribution of other tax bases to a country’s overall tax revenue?

The objective of the study

The objective of the study is to find out the developmental impact of indirect tax on Nigeria economy. The specific objectives are;

  1. To determine the impact of value added tax on economic growth in Nigeria
  2. To evaluate the impact of custom and excise duties on economic growth in Nigeria.

Research question

The following research question were formulated;

  1. What is the impact of value added tax on economic growth in Nigeria?
  2. What is the impact of custom and excise duties on economic growth in Nigeria?

Research hypotheses

The following research hypotheses were formulated;

H0: There is no significant relationship between value added tax and economic growth in Nigeria.

H1: There is significant relationship between value added tax and economic growth in Nigeria.

H0: There is no significant relationship between custom and excise duties and economic growth in Nigeria

H2: There is no significant relationship between custom and excise duties and economic growth in Nigeria.

Significance of the study

The study will be very significant to students, lecturers and Nigeria government. The study will give a clear Insight on the developmental impact of indirect tax on Nigeria economy. The result of the study will be hug benefit to government because it will enlighten the relationship between custom and excise duties and the economic growth in Nigeria and the contribution of added tax to Nigeria economy. The study will also serve as a reference to other researcher that will embark on the related topic

Scope of the study

The scope of the study covers developmental impact of indirect tax on Nigeria economy. This research made use of data on Real GDP, VAT revenue, Custom and Excise Duties Revenue and inflation from 2000 – 2020 (20 years). The major sources of these data are the publications of the Central Bank of Nigeria, Nigerian Investment Promotion Commission (NIPC) and Securities and Exchange Commission (SEC).

Definition of terms

Indirect tax: Indirect tax is a tax that can be passed on to another individual or entity. Indirect tax is generally imposed on suppliers or manufacturers who pass it on to the final consumer. Excise duty, customs duty, and Value-Added Tax (VAT) are examples of Indirect taxes.

Nigeria economy: The economy of Nigeria is a middle-income, mixed economy and emerging market, with expanding manufacturing, financial, service, communications

Value added tax: VAT is a consumption tax paid on all goods and services provided in or imported into Nigeria. VAT, which is currently charged at the rate of 7.5% is payable by individuals, companies, and government agencies

Custom duty: Customs duties in Nigeria are levied only on imports. Rates vary for different items, typically from 5% to 35%, and are assessed with reference to the prevailing Harmonized Commodity and Coding System (HS code)


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