Asymmetric Effects of Non-Oil Tax Revenue on Economic Growth in Nigeria

By: Agbo Cyril Uchenna, Kalu Uma, Ogbuagu Anuli Regina , Eze Ikechukwu Okereke

Pages: 120–138, Volume: 2, Number: 2

Published by: AEFUNAI Journal of Economics, Finance and Development Studies, Alex Ekwueme Federal University, Ndufu-Alike, 9/1/2025, 2025

ISSN (Electronic): 2536-6742

DOI: 10.48028/iiprds/aefunaijefds.v2.i2.07

Asymmetric Effects of Non-Oil Tax Revenue on Economic Growth in Nigeria

Abstract:

This study investigates the asymmetric effects of non-oil tax revenue on economic growth in Nigeria, utilizing quarterly data from 2011 to 2023. The analysis employs the Nonlinear Autoregressive Distributed Lag (NARDL) model, with Gross Domestic Product per capita as the dependent variable and Company Income Tax (CIT), Capital Gains Tax (CGT), Education Tax (EDT), and Value Added Tax (VAT) as independent variables. Control variables include Gross Fixed Capital Formation, Government Expenditure on Education, and Trade Openness. The Augmented Dickey-Fuller (ADF) test confirms that the variables are integrated at different levels, justifying the use of the NARDL framework. The short-run results reveal significant asymmetries where CIT positively impacts economic growth with coefficients of 0.039 and 0.063 for current and lagged terms, respectively, while a negative shock from CIT has a detrimental effect with a coefficient of -0.076. In the long run, the coefficient for CIT is -0.156, suggesting that while CIT stimulate growth initially, it has detrimental long- term effects, reinforcing the need for careful tax policy considerations. The Wald test results indicate significant asymmetry, allowing for the rejection of the null hypothesis. In contrast, CGT shows that both positive and negative changes significantly decrease GDP per capita in the short run, with long-run analysis indicating a statistically significant negative effect from positive changes in CGT. EDT demonstrates a strong positive effect in the short run (coefficient of 0.758), while the long-run analysis shows that both positive and negative changes significantly enhance GDP per capita. VAT exhibits positive coefficients, suggesting a stimulating effect on the economy, with a long-run coefficient of 1.171 indicating its potential for enhancing economic growth. The NARDL long-run Wald test results further confirm significant asymmetry in the effects of the independent variables on GDP per capita, highlighting the necessity for policymakers to consider the implications of tax structures and their potential long-term effects on economic performance. The study recommends among others, the restructuring of CIT to balance short-term benefits with long-term economic sustainability. This will include providing incentives for reinvestment and ensuring that tax rates do not deter private sector investment.

Keywords: Non-oil tax revenue, NARDL, Asymmetric effects, Economic growth, Fiscal policy