jesp | Jurnal Ekonomi & Studi Pembangunan 

  
 
 
 
 

Article Type: Research Paper 
 

TAX AND ECONOMIC GROWTH IN NIGERIA: 
AN ARDL APPROACH 
 
 
Justine Tochukwu Nwanakwere 
 
 
Abstract: This study investigates the relationship between tax and economic 
growth (GDP) using the Auto-Regressive Distributed Lag (ARDL) bound test 
approach. The study further decomposed tax into company income tax (CIT), 
petroleum profit tax (PPT), value-added tax (VAT) and excise and custom duties 
(ECD), then examined the effect of each of them on economic growth. The data for 
the study were obtained from Federal Inland Revenue Service (FIRS) and Central 
Bank of Nigeria (CBN) bulletin, spanning from 1981-2014. The ARDL results show 
no cointegration among the variables. Interestingly, the short run results reveal 
that total tax is insignificant while the decomposed taxes are significant. Petroleum 
profit tax and value-added tax have positive relationship with GDP while company 
income tax and excise and custom duties have negative relationship with GDP. 
From these findings, the study recommends an effective use of taxation so as to 
improve the impact of tax on the Nigerian economy. Also, efficient tax regulation 
should be put in place to mitigate the issue of tax evasion, especially among firms 
and corporate entities, and improve the contribution of CIT to economic growth. 
 

Keywords: Tax; ARDL; Economic Growth; Taxation. 
JEL Classification: G1; H2; H7; H24. 
 

 
 

Introduction 
 

The economic history of both developed and developing countries reveals 
that tax is an indispensible instrument in the hand of government; not only 
as revenue source, but also as a fiscal policy measure for economic 
stabilization. Tax plays a vital role in economic development of a country 
which includes: resource mobilization, reduction in inequalities of income, 
improvement in social welfare, foreign exchange, regional development, 
inflation control, etc (Arisoy & Unlukaplan, 2010). According to the classical 
economists, the only objective of taxation was to raise government revenue 
(Dahlby, 2003), but with the progression of knowledge and ideologies, the 
aim of taxes has also evolved. Aside the fundamental role of public revenue 
generation by tax, it affects income level of a consumer, consumption level 
and pattern, production and distribution pattern. Hence, the change in 
paradigm implies that tax can serve as a tool in allocating available 
resources, raising government revenue, encouraging savings and 
investment, accelerating economic growth, price stability, and control 
mechanism (Emran & Stiglitz, 2005).   

 
 
 
 
AFFILIATION: 
Nigerian Institute of Social and 
Economic Research, Ibadan, 
Nigeria. 
 
*CORRESPONDENCE:      
justine.nwanakwere@gmail.com    
 
THIS ARTICLE IS AVALILABLE IN: 
http://journal.umy.ac.id/index.php/esp  

 
DOI: 10.18196/jesp.20.2.5019 
 
CITATION: 
Nwanakwere, J. T. (2019). Tax and 
Economic Growth in Nigeria: An 
ARDL Approach. Jurnal Ekonomi & 
Studi Pembangunan, 20(2), 124-
134. 
 
ARTICLE HISTORY 
Received: 
19 June 2019 
 
Accepted: 
29 September 2019 

mailto:justine.nwanakwere@gmail.com
http://journal.umy.ac.id/index.php/esp
http://journal.umy.ac.id/index.php/esp/article/view/6470


Nwanakwere 
Tax and Economic Growth in Nigeria: An ARDL Approach 

 

 

Jurnal Ekonomi & Studi Pembangunan, Vol 20 No. 2, Oktober 2019 | 125 

Tax is a compulsory levy imposed on a subject or upon his property by the government to 
provide security, social amenities and to create conditions for the economic wellbeing of 
the society (Appah & Oyandonghan, 2011). Anyanwu (1997) defined tax as compulsory 
transfer or payment from private individuals, institutions or groups to the government. In 
view of Jarkir (2011), tax is a contribution enacted by the state; it is non-penal but 
compulsory and unrequited transfer of resources from the private to the public sector, 
levied on the basis of predetermined criteria (Jarkir, 2011). Thus, tax can be said to be a 
compulsory levy paid by individuals and corporate bodies as stipulated by the tax law 
which serves as revenue to the government.  
 
Taxes are crucial elements of the economy and they determine changes in national 
income and other macroeconomic variables, especially in developing countries like 
Nigeria. Increased taxation on imported goods and services has considerable effect on 
production level of such goods and services produced by local manufacturers. 
Consequently, an efficient and effective tax administration results in increased revenue 
yield. However, poor fiscal discipline in the allocation of resources as well as the 
implementation of ineffective tax regime in Nigeria become a major challenge (Garba, 
2014).  
 
Over time, studies have been carried out on the empirical relationship between tax and 
economic growth, both in the developed and the developing nations (Kyle, 2018; Saibu, 
2015; Ahmad & H.Sial, 2016). The outcome of the studies has shown conflicting empirical 
results as to whether tax brings about economic growth or otherwise.  
 
In a study by Wambai and Hanga, (2013) on taxation and social development in Nigeria, 
they found that the attitude of the government on taxation need to change and 
recommends a tax system that concentrate on establishing simplicity, predictability, and 
neutrality. Simwaka, Munthali, Kabango, and Chiumia (2012) studies analyses the effect 
of taxation in sub-Saharan Africa. They found that taxes levied on personal and corporate 
income reduces economic growth. From their study, one may be tempted to conclude 
that the tax structure is largely irrelevant in less developed economies, but embedded in 
an effective tax system are benefits for both the taxpayers and the government.  
 
Tosun and Abizadeh (2005) studied economic growth and tax charges in OECD countries 
from 1980 to 1999; their study reveals that economic growth measured by GDP per capita 
has significant effect on tax mix of GDP per capita. The study recorded a decline in shares 
of payroll, goods and services and positive growth from personal and property taxes. 
 
Olusanya, Medunoye, and Oluwatosin, (2012) investigated taxation as a fiscal policy 
instrument for income redistribution among Lagos state civil servants using spearman’s 
rank correlation coefficient. The study found a positive relationship between tax as fiscal 
policy instrument and income redistribution. In the study on taxation and economic 
growth of the United States, Engen and Skinner (1996) found a modest effect on the order 
of 0.2 to 0.3 percentage point increase in growth rates in response to major tax reform. 
Their findings suggest that such minor effect cumulatively can have large impact on the 
standards of living. 



Nwanakwere 
Tax and Economic Growth in Nigeria: An ARDL Approach 

 

 

Jurnal Ekonomi & Studi Pembangunan, Vol 20 No. 2, Oktober 2019 | 126 

In Nigeria, different types of taxes are being imposed over time on the various economic 
agents (Margaret, 2014). The primary purpose is to generate revenue for the government 
which in turn should be used to provide social amenities and achieve economic growth. 
However, it is also of a great debate as to whether tax has contributed to the economic 
growth of the country or not. Besides, this study chose to adopt the ARDL bound test for 
its estimation of cointegration rather than the conventional Johansen and OLS estimation 
techniques. 
 
Consequently, this study seeks to empirically examine the impact of tax on economic 
growth in Nigeria. Besides, the study is extended by disaggregating tax into company 
income tax (CIT), petroleum profit tax (PIT), value-added tax (VAT), and excise and custom 
duties (ECD) and evaluates their individual impacts on economic growth in the country. In 
relation to this effect, the study begins by asking questions like: what is the relationship 
between tax and economic growth in Nigeria? Do any of the individual taxes contribute 
to economic growth in Nigeria? Answers to these questions will help in achieving the 
objectives of the study. This study is organized into five sections starting with the 
introduction, followed by review of literature, theoretical construct and methodology, 
results and discussion, and conclusion and policy recommendation in that order. 
 
 

Research Method 
 

Theoretical Construct  
 
The neoclassical growth model of Solow reveals the basic theoretical linkage between tax 
and economic growth. In the growth model, output of an economy is determined by the 
size and skill of labour and the size and technological productivity of its capital stock 
(Engen and Skinner, 1996). Therefore, the growth rate of output will depend on the 
growth rate of capital stock – both physical and human capital – and changes in 
productivity of these inputs in the economy. The growth rate of the economy can be 
stated as: 
 

𝑮𝒊̇ = ∝ �̇� +  𝜷�̇� +  ∀̇ 
 

where the economic growth rate of country i is �̇�, �̇� 𝑎𝑛𝑑 �̇� are change in capital stock 
(net investment) and growth rate in effective labour force, respectively, ∀̇ measures 
productivity growth, while ∝ 𝑎𝑛𝑑 𝜷 are marginal productivity of capital and output 
elasticity of labour, respectively. 
 
Engen and Skinner (1996) stated that the neoclassical growth theoretical framework gives 
insight into the connection between tax and economic growth through the variables on 
the model above. Hence, they argued that higher taxes can discourage the investment 
rate, or the net growth in the capital stock, through high statutory tax rates on corporate 
and individual income and high effective capital gains tax rates. Besides, taxes may 
discourage labour force participation and affect skills, trainings and educational 
attainment which in turn weaken labour supply growth. In addition, tax policy can affect 



Nwanakwere 
Tax and Economic Growth in Nigeria: An ARDL Approach 

 

 

Jurnal Ekonomi & Studi Pembangunan, Vol 20 No. 2, Oktober 2019 | 127 

productivity growth rate by discouraging research and development (R&D), and reduce 
marginal productivity of capital by discouraging investment in productive heavily taxed 
sectors into less taxed sectors with low productivity (Engen and Skinner, 1996). 
 
Methodology 
 
This study adopted the Auto-Regressive Distributed Lag (ARDL) model bound testing 
approach (Dickey & Fuller, 1979). This method helps to take care of the problem of drifting 
series and equally enables us to determine both the short run and the long run 
relationship of the model (Ahmed, Zaman, & Syah, 2011). The ARDL approach, developed 
by Pesaran, Shin, & Smith (2001), was chosen over the conventional Engle and Granger 
(1987) and Johansen and Juselius (1990) approach for long run test (cointegration) as a 
result of its advantages over them. The ARDL approach can be applied to series that are 
both of the same order and of different order of integration i.e. I(0) or I(1) series, or 
combination of I(0) and I(1) series; unlike the other techniques (Ahmad, 2016). Besides, 
Haug (2002) pointed out that ARDL bounds testing approach is more suitable and provides 
better results for small sample size, and the short and long-run parameters are estimated 
simultaneously.  
 
The study identified both dependent variable (economic growth measured by the GDP) 
and independent variable which is tax. It focuses on the impact of total tax on economic 
growth, and by extension, examines the individual impacts of the disaggregated taxes 
(CIT, PPT, VAT and ECD) on economic growth. Thus, GDP depends on total tax generated 
within the period under study and also on the disaggregated individual taxes (CIT, PPT, 
VAT and ECD). Hence, we established two separate models for the study. 
 
In terms of functional relationship, we have them stated as; 
GDP  = f(TAX)      …….…………………… (1)  
GDP  = f(CIT, PPT, VAT, ECD)     ………………….……… (2) 
 
Mathematical representations of the functions are stated as; 
GDP  = β0 + β1TAX + ɛ     ....…………............. (3) 
GDP  = β0+ β1CIT + β2PPT + β3VAT + β4ECD + v  ……………....……….. (4) 
 
Where: 
GDP  = Gross domestic product; 
TAX  = Tax (aggregated tax); 
CIT  = Corporate income tax; 
PPT  = Petroleum profit tax; 
VAT  = Value-added tax; 
ECD  = Excise and custom duties; 
ɛ, v  = error terms. 
 
β0, β1, β2, β3, and β4, are parameters which serve as coefficients of the estimators defined 
above in the models. 
 



Nwanakwere 
Tax and Economic Growth in Nigeria: An ARDL Approach 

 

 

Jurnal Ekonomi & Studi Pembangunan, Vol 20 No. 2, Oktober 2019 | 128 

The cointegration relationship among variables of the model specified in equations (4) 
following the ARDL equation is stated as: 
 
∆log (𝐺𝐷𝑃)𝑡 =  ∅ + 𝜑1 𝑙𝑜𝑔(𝐺𝐷𝑃)𝑡−1 +  𝜑2 𝑙𝑜𝑔(𝐶𝐼𝑇)𝑡−1 +  𝜑3 𝑙𝑜𝑔(𝑃𝑃𝑇)𝑡−1 +
 𝜑4 𝑙𝑜𝑔(𝑉𝐴𝑇)𝑡−1 +  𝜑5 𝑙𝑜𝑔(𝐸𝐶𝐷)𝑡−1 +  ∑ 𝛾𝑖 𝑙𝑜𝑔(𝐺𝐷𝑃)𝑡−1

𝑝
𝑖=1 +  ∑ 𝜃𝑖 𝑙𝑜𝑔(𝐶𝐼𝑇)𝑡−1

𝑝
𝑖=1 +

 ∑ 𝛿𝑖 𝑙𝑜𝑔(𝑃𝑃𝑇)𝑡−1
𝑝
𝑖=1 +  ∑ 𝜇𝑖 𝑙𝑜𝑔(𝑉𝐴𝑇)𝑡−1

𝑝
𝑖=1 +  ∑ 𝜎𝑖 𝑙𝑜𝑔(𝐸𝐶𝐷)𝑡−1

𝑝
𝑖=1 +  𝑡   

 
𝒑 is the ARDL model maximum lag order. The coefficients of the lagged variables 
represent the long run relationship, while the coefficients of the summations represent 
the short run model. The F-test is carried out on the joint null hypothesis that the 
coefficients of the lagged variables are zero (Nkoro & Uko, 2016). The hypothesis states 
that the coefficients of the lag level variables are zero i.e., there are no long run 
relationships among the series. This is defined by: 
 
H0 :𝜑1 =  𝜑2 =  𝜑3 =  𝜑4 =  𝜑5= 0 (long run relationship does not exist) 
 
H1 : 𝜑1 ≠ 𝜑2 ≠ 𝜑3 ≠ 𝜑4 ≠ 𝜑5 ≠ 0 (long run relationship exist) 
 
 
Sources of Data 
 
Data for the study was obtained from the Federal Inland Revenue Service (FIRS), Nigeria 
Bureau of Statistics (NBS), and Central Bank of Nigeria (CBN) Statistical Bulletin. The FIRS 
have the statutory authority of tax revenue collection in the Nigeria. The data spanned 
from 1981 to 2014. However, VAT which was initiated in 1994 has some missing data. 
Before the introduction of VAT, sales tax was levied at retail, wholesale, and private final 
consumption levels, which was later officially replaced by VAT. Many authors have 
suggested that sales tax can be used to fill up for the missing data (Ekeocha, Ekeocha, 
Malaolu, & Oduh, 2012).  
 
  

Result and Discussion 
 

Various preliminary tests such as descriptive statistics, diagnostic tests (Breusch-Goddfrey 
Serial Correlation LM test, Glejser Heteroskedasticity test, Ramey RESET tests) were 
carried out as well as unit root test using the Augmented Dicky-Fuller (ADF) unit root test 
(see Table 1). GDP is stationary at first difference while tax in aggregate is stationary at 
level. On the other hand, the individual taxes are stationary at the combination of both 
level and first difference I(0) and I(1). The credibility of the series, cointegration and 
hypotheses were tested through the autoregressive regressive distributive lag 
(ARDL)/bound test. Firstly, we analyzed the relationship between aggregated tax and 
economic growth, after which we analyzed relationships between various individual taxes 
(CIT, PPT, VAT, and ECD) and economic growth (GDP). 
 
 
 



Nwanakwere 
Tax and Economic Growth in Nigeria: An ARDL Approach 

 

 

Jurnal Ekonomi & Studi Pembangunan, Vol 20 No. 2, Oktober 2019 | 129 

Table 1 Summary of Unit Root Test Result 
Augmented Dicky-Fuller (ADF) 

Variables Level First Difference Critical value (5%) I(d) 

GDP 2.339251 -6.633529** -3.552973 I(1) 
TAX -5.817870*  -2.960410 I(0) 
CIT -1.404865 -6.137964** -3.552973 I(1) 
VAT -5.204487*  -3.658446 I(0) 
PPT -3.543251 -5.861270** -3.552973 I(1) 
ECD -1.476805 -5.242427** -3.552973 I(1) 

Note: * significant at level, **significant at first difference 
Source: Authors’ computation 
 
Autoregressive Distributed Lag (ARDL) Model Result 
 
The ARDL bounds test is always stated in the null hypothesis form which means that there 
is no cointegration among the variables. Thus the decision rule is such that if the F-
Statistics value is greater than the upper bound critical values, we reject the null; and if 
less than the lower bound critical values, we do not reject the null. If the F-Statistics is 
between upper and lower bounds critical values, the result becomes inconclusive. 
 
Tables 2 and 3 show that there is no cointegration among the variables as the F-statistics 
values in the two results are less than the lower bound at different significance level. Here, 
there is no long run relationship between total tax and GDP, and there is no long run 
relationship between the individual taxes (company income tax, petroleum profit tax, 
value added tax, and excise and custom duties) and GDP. Hence, we proceed to estimate 
the short run models. 
 
Table 2 Summary of ARDL Bounds Test for Cointegration of Aggregate Tax and GDP 

Variables F-Statistics Cointegration 

F(GDP,TAX) 1.54  
Critical value Lower Bound Upper Bound 
1% 8.74 9.63 
2.5% 6.56 7.3 
5% 5.59 6.26 

Source: Authors’ computation 
 
Table 3 Summary of ARDL Bounds Test for Cointegration of individual Taxes and GDP 

Variables F-Statistics Cointegration 
F(GDP,CIT, PPT, VAT, ECD) 3.20  
Critical value Lower Bound Upper Bound 
1% 4.40 5.72 
2.5% 3.89 5.07 
5% 3.47 4.56 

Source: Authors’ computation 
 
 
 



Nwanakwere 
Tax and Economic Growth in Nigeria: An ARDL Approach 

 

 

Jurnal Ekonomi & Studi Pembangunan, Vol 20 No. 2, Oktober 2019 | 130 

Short Run Estimate of Aggregate Tax  
 
Table 4 Summary of Short Run Estimate of ARDL Test (aggregate Tax) 

Variable Coefficient Std. Error t-Statistic Prob.   
LOG(GDP(-1)) 0.8904 0.0650 13.688 0.0000 
LOG(TAX) 0.1770 0.1257 1.4075 0.1703 
LOG(TAX(-1)) -0.2317 0.1232 -1.8817 0.0703 
C 2.4292 1.5271 1.5907 0.1229 
@TREND 0.034888 0.0313 1.1135 0.2749 
R2  =0.968174      Adjusted R2=0.963627     F-stat=212.9457      Prob(F-stat.)=0.00000    D-
W= 2.395503 

Source: Author’s computation 
 
Table 4 shows that tax in the current period has a positive relationship with GDP, while 
tax in the previous periods has a negative with GDP. This implies that current tax does 
contributes to economic growth than previous tax in the economy. However, the result 
also shows that tax in the current period is not significant, while tax in previous period is 
significant.   
 
Short Run Estimate of Individual Taxes  
 
Table 5 Summary Short Run Estimate of ARDL Test (individual Taxes) 

Variable Coefficient Std. Error t-Statistic Prob.   

LOG(GDP(-1)) -0.3178 0.2043 -1.5554 0.142 
LOG(CIT) -0.8385 0.3265 -2.5675 0.022 
LOG(PPT) 0.1445 0.0516 2.7964 0.014 
LOG(VAT) 1.4285 0.3085 4.6299 0.000 
LOG(ECD) -1.0797 0.1961 -5.5047 0.000 
C 30.53049 4.6477 6.568925 0.000 
R2  =0.992614      Adjusted R2 =0.989449     F-stat=313.5925Prob(F-stat.)=0.00000     
D-W= 2.290476 

Source: Author’s computation 
 
Table 5 shows ARDL short run result for the individual taxes: company income tax (CIT), 
petroleum profit tax (PPT), value added tax (VAT), and excise and custom duties (ECD), 
and GDP. It is observed from the R-square value that 98 percent of the change in GDP is 
attributed to the various taxes; hence the model is good for estimation and prediction. 
The value of the Durbin-Waston statistics is greater than 2, which signifies that the 
residuals of the model are uncorrelated. The table further shows that all the variables are 
significant with the exception of one lag value of GDP. PPT and VAT have positive 
relationship with GDP while CIT and ECD have negative relationship with GDP. Based on 
the magnitude of the coefficients, it is observed that VAT has the highest value with 1.42, 
while PPT records the lowest with 0.14. This implies that VAT contributes the highest to 
economic growth in Nigeria while PPT contributes the lowest. This result supports the 
findings in the Federal Inland Revenue Service report that VAT contributes the most to tax 
revenue and economic growth among other taxes in Nigeria (FIRS, 2018).   
 



Nwanakwere 
Tax and Economic Growth in Nigeria: An ARDL Approach 

 

 

Jurnal Ekonomi & Studi Pembangunan, Vol 20 No. 2, Oktober 2019 | 131 

H0 1 : Company income tax has no significant impact on economic growth: 
 
Table 5 reveals that CIT is significant at 5 percent level; hence we reject the null 
hypothesis. Given the negative coefficient of -0.84 for CIT, 1 percent increase in company 
income tax will lead to a fall in GDP by 0.84 percent. The negative impact could be as a 
result of weak infrastructures that affect ease of doing business in the country (Chigbu, 
Akujuobi, & Ebimobowei, 2012). Companies and firms, therefore, struggle to break-even 
to keep up with tax payment thus; tax evasion becomes inevitable, especially at the 
slightest increase. Also, tax is a disincentive to investors; therefore, increase in company 
income tax would lead to fall in investment which affects the growth of the economy (Otu 
& Adejumo, 2016). 
 
H0 2 : Petroleum profit tax does not have significant impact on economic growth:  
 
Petroleum profit tax records a positive relationship with GDP at 5 percent level of 
significance. This suggests that we reject the null hypothesis, thereafter, concluding that 
PIT has positive significant impact on economic growth in Nigeria. Despite the positive 
impact of PIT on the economy, it is observed that the magnitude (0.14) is very low 
compared to VAT. This means that 1 percent increase in PIT will increase economic growth 
by 0.14 percent. 
     
H0 3 : Value-added tax has no significant impact on economic growth:  
 
The result further shows that value-added tax contributes significantly the most to 
economic growth in Nigeria; hence, the null hypothesis is rejected. A percentage increase 
in VAT will increase GDP by 1.42 percent. The reason for this could be attributed to the 
fact that VAT is an indirect tax which the consumers are the ultimate payers. Most people 
pay this tax without the knowledge of it. Hence, it is easy to collect and cases of avoidance 
and evasion cannot be feasible. Besides, Nigeria is more of a consuming nation with 
population of over 180 million people (Wambai & Hanga, 2013). Therefore, VAT, which is 
a consumption-based tax, is a major revenue generation tax component which drives the 
economy. This is in line with finding of Egbunike, Emudainohwo, and Gunardi, (2018).  
     
H0 4 : Excise and custom duties have no significant relationship with economic growth:  
 
In addition, Table 5 shows that Excise and custom duties (ECD) have negative relationship 
with economic growth, with significance level of 1 percent. Also, the magnitude of its 
coefficient is 1.08; hence, a percentage increase in ECD will decrease GDP by 1.08 percent. 
This could be caused by the weak industrial base and the less productive manufacturing 
sector which contributed only about 9 per cent to GDP in 2018 (CBN, 2018). Besides, as 
mentioned earlier in the case of company income tax, producers tend to avoid and evade 
tax. As a result of their low production capacity and high cost of business operation in the 
country, any attempt to increase excise and custom duties will threaten the existence of 
many industries, affecting the GDP negatively. Furthermore, high level of corruption 
among the agencies contributes to the negative impact on the economy (Edame & Okoi, 
2014). 



Nwanakwere 
Tax and Economic Growth in Nigeria: An ARDL Approach 

 

 

Jurnal Ekonomi & Studi Pembangunan, Vol 20 No. 2, Oktober 2019 | 132 

Conclusion 
 

The result from the study reveals that total tax has a positive impact on economic growth; 
however, the impact is not substantial. Hence, we conclude that aggregate tax has not 
contributed significantly to the economic growth of the country. In contrast to this result, 
the study shows that the disaggregated taxes are all significant. While petroleum profit 
tax and value-added tax have positive impact on economic growth in Nigeria, company 
income tax and excise and custom duties have negative impact on economic growth. 
Value-added tax and petroleum income tax respond positively as a result of the nature of 
tax of the former (indirect tax), which is levied on goods and services, and payers, most 
times, are not aware of their paying it. Revenue generated from these taxes is always 
massive as a result of the dynamism of the sectors (especially the oil sector), and the 
difficulty to avoid or evade as in the case of value-added tax. 
 
Recommendation 
 
From these findings, we make the following recommendations: (1) There should be fiscal 
discipline and effective use of tax revenue by the government to achieve macroeconomic 
growth in the economy. (2) Tax administration should be organized in such a way that 
makes it effective and efficient; hence, curbing tax evasion and avoidance. (3) 
Government should monitor and moderate company income tax so as to encourage 
investors into the country which would lead to CIT contributing to economic growth in 
the country. (4) Government should diversify the economy from a single sector (oil) to 
multiple sectors in order to increase the capacity base of the country; hence, generating 
more revenue and contributing to growth. 
 
 

References 
 
Ahmad, S., & H.Sial, M. (2016). Taxes and Economic Growth: An Empirical Analysis of 

Pakistan. European Law Review 8(6), 18-33. https://doi.org/10.21859/eulawrev-
08062 

Ahmed, J., Zaman, K., & Shah, I. A. (2011). An Empirical Analysis of Remittances-Growth 
Nexus in Pakistan Using Bounds Testing Approach. Journal of Economics and 
International Finance. 3(3), 176-186. Retrieved from: 
https://academicjournals.org/journal/JEIF/article-abstract/6AE346E4733  

Anyanwu, J. C. (1997). Nigeria Public Finance. Joance Education Publishers, Onitsha. 
Appah, E. & Oyandonghan, J. K. (2011). The challenges of tax mobilization and 

management in the Nigerian economy. J. Bus. Admin. Manage., 6(2): 128-136. 
Arisoy, I., & Unlukaplan, I. (2010), Tax Composition and Growth in Turkey: An Empirical 

Analysis. International Research Journal of Finance and Economics. 59(9), 51 – 61. 
Central Bank of Nigeria. (2019). Annual Report 2019. 
Chigbu, E. E., Akujuobi, L. E., & Ebimobowei, A. (2012). An Empirical Study on The 

Causality Between Economic Growth and Taxation in Nigeria. Journal of Economic 
Theory. 4(2), 29-38. 

https://doi.org/10.21859/eulawrev-08062
https://doi.org/10.21859/eulawrev-08062
https://academicjournals.org/journal/JEIF/article-abstract/6AE346E4733


Nwanakwere 
Tax and Economic Growth in Nigeria: An ARDL Approach 

 

 

Jurnal Ekonomi & Studi Pembangunan, Vol 20 No. 2, Oktober 2019 | 133 

Dahlby, B. (2003). Restructuring the Canadian Tax System by Changing the Mix of Direct 
and Indirect Taxes. In H. G. Resource Allocation and Welfare, in ‘NBER’ and the 
Brookings Institution, Princeton: Princeton University Press 25 – 75. 

Dickey, D. A., & Fuller, W. A. (1979). Distribution of the Estimators for Autoregressive 
Time Series with a Unit Root. Journal of the American Statistical Association. 74(366), 
427–731. https://doi.org/10.2307/2286348  

Edame, G. E., & Okoi, W. W. (2014). The Impact of Taxation on Investment and Economic 
Development in Nigeria. Academic Journal of Interdisciplinary Studies. 3(4), 209-218. 
https://doi.org/10.5901/ajis.2014.v3n4p209  

Egbunike, F. C., Emudainohwo, O. B., & Gunardi, A. (2018). Tax Revenue and Economic 
Growth: A Study of Nigeria and Ghana. Signifikan: Jurnal Ilmu Ekonomi. 7(2), 213 – 
220. https://doi.org/10.15408/sjie.v7i2.7341  

Ekeocha, P. C., Ekeocha, C. S., Malaolu, V., & Oduh, M. O. (2012). Revenue Implications of 
Nigeria’S Tax System, Journal of Economics and Sustainable Development, 3(8), 206-
215. Retrieved from: 
https://www.iiste.org/Journals/index.php/JEDS/article/view/2321/2322  

Emran, M. S., & Stiglitz, J. E. (2005). On Selective Indirect Tax Reform in Developing 
Countries. Journal of Public Economics. 89(4), 599-623. 
https://doi.org/10.1016/j.jpubeco.2004.04.007  

Engen, E. M. & Skinner, J. (1996). Taxation and Economic Growth. NBER Working Paper. 
National Bureau of Economic Research, Cambridge. https://doi.org/10.3386/w5826  

Engle, R. F. & Granger, C. W. J. (1987). Cointegration and Error Correction Representation: 
Estimation and Testing. Econometrica. 55(2), 251–276. 
https://doi.org/10.2307/1913236  

Federal Inland Revenue Service (FIRS). (2018). Annual Report 2018, Revenue generation in 
Nigeria. 

Garba L. S. (2014). Tax Revenue and Economic Growth. Thesis. Department of 
Accounting, Faculty of Administration, Ahmadu Bello University, Zaria. 

Haug, A. A. (2002). Temporal Aggregation and the Power of Cointegration Tests: A 
Montecarlo Study. Oxford Bulletin of Economics and Statistics. 64(4): 399-412. 
https://doi.org/10.1111/1468-0084.00025  

Jarkir, K. (2011). Role of Tax Revenue in Economic Development. Journal of Accounting 
and Tax Revenue. 33(55), 91-104. 

Johansen, S. & Juselius, K. (1990). Maximum Likelihood Estimation and Inference on 
Cointegration – with Applications to the Demand for Money. Oxford Bulletin of 
Economics and Statistics. 52(2), 169-210. https://doi.org/10.1111/j.1468-
0084.1990.mp52002003.x  

Kazmi, S. M. A. (2015). Real Private Consumption Expenditure ModelingAn Empirical 
Study on Pakistan. Journal of Economics and Sustainable Development, 6(17), 36-48. 
Retrieved from: 
https://www.iiste.org/Journals/index.php/JEDS/article/view/25801/26648  

Margaret, N., Okoli, Charles, O. N, Gift, N. K. (2014). Taxation and Economic Growth in 
Nigeria: A Granger Causality Approach. International Journal of Research in 
Management, Science & Technology. 2(3). 

McNabb, K. (2018). Tax Structures and Economic Growth: New Evidence from the 
Government Revenue Dataset. Journal of International Development. 30(2), 173–205. 
https://doi.org/10.1002/jid.3345  

Nkoro, E., & Uko, A. K. (2016). Autoregressive Distributed Lag (ARDL) Cointegration 
Technique: Application and Interpretation. Journal of Statistical and Econometric 

https://doi.org/10.2307/2286348
https://doi.org/10.5901/ajis.2014.v3n4p209
https://doi.org/10.15408/sjie.v7i2.7341
https://www.iiste.org/Journals/index.php/JEDS/article/view/2321/2322
https://doi.org/10.1016/j.jpubeco.2004.04.007
https://doi.org/10.3386/w5826
https://doi.org/10.2307/1913236
https://doi.org/10.1111/1468-0084.00025
https://doi.org/10.1111/j.1468-0084.1990.mp52002003.x
https://doi.org/10.1111/j.1468-0084.1990.mp52002003.x
https://www.iiste.org/Journals/index.php/JEDS/article/view/25801/26648
https://doi.org/10.1002/jid.3345


Nwanakwere 
Tax and Economic Growth in Nigeria: An ARDL Approach 

 

 

Jurnal Ekonomi & Studi Pembangunan, Vol 20 No. 2, Oktober 2019 | 134 

Methods. 5(4), 1-3. Retrieved from: 
https://ideas.repec.org/a/spt/stecon/v5y2016i4f5_4_3.html  

Olusanya, S.O., Medunoye, P. & Oluwatosin, O. A. (2012). Taxation as a Fiscal Policy 
Instrument for Income Redistribution among Lagos State Civil Servants. IOSR 
Journal of Humanities and Social Sciences. 5(5), 60-70. 
https://doi.org/10.9790/0837-0556070  

Otu, H. B. & Adejumo, T. O. (2013). The effects of Tax Revenue on Economic growth in 
Nigeria (1970 – 2011). International Journal of Humanities and Social Science 
Invention. 2(6), 16-26. Retrieved from: 
https://www.academia.edu/20772705/The_Effects_of_Tax_Revenue_on_Economic
_Growth_in_Nigeria_1970-2011_  

Pesaran, M. H., Y. Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis 
of level relationships. Journal of Applied Econometrics. 16(3), 289-326. 
https://doi.org/10.1002/jae.616  

Saibu, O. M. (2015). Optimal Tax Rate and Economic Growth. Evidence from Nigeria and 
South Africa. Euro Economica. 34(1), 41-50. Retrieved from: http://journals.univ-
danubius.ro/index.php/euroeconomica/article/view/2586/3117  

Simwaka, K., Munthali, T., Kabango, G., & Chiumia, A. (2012). Financial Development and 
Economic Growth in Malawi: An Empirical Analysis. Banks & Bank Systems (2012). 
7(3), 85-96.  

Tosun, M. S., & Abizadeh, S. (2005). Economic growth and taxcomponents: an analysisof 
tax changes in OECD. Applied Economics, 37, 2251-2263. Retrieved from: 
https://www.researchgate.net/publication/24075588_Economic_growth_and_tax_co
mponents_An_analysis_of_tax_changes_in_OECD 

Wambai, U. S. K., & Hanga, B. Y. (2013). Taxation and Societal Development in Nigeria: 
Tackling Kano’s Hidden Economy. International Journal of Academic Research in 
Business and Social Science. 3(3), 113-125. Retrieved from: 
https://pdfs.semanticscholar.org/4669/68c67cbc839a2efa18320746dfad3858f3a0.pdf  

https://ideas.repec.org/a/spt/stecon/v5y2016i4f5_4_3.html
https://doi.org/10.9790/0837-0556070
https://www.academia.edu/20772705/The_Effects_of_Tax_Revenue_on_Economic_Growth_in_Nigeria_1970-2011_
https://www.academia.edu/20772705/The_Effects_of_Tax_Revenue_on_Economic_Growth_in_Nigeria_1970-2011_
https://doi.org/10.1002/jae.616
http://journals.univ-danubius.ro/index.php/euroeconomica/article/view/2586/3117
http://journals.univ-danubius.ro/index.php/euroeconomica/article/view/2586/3117
https://www.researchgate.net/publication/24075588_Economic_growth_and_tax_components_An_analysis_of_tax_changes_in_OECD
https://www.researchgate.net/publication/24075588_Economic_growth_and_tax_components_An_analysis_of_tax_changes_in_OECD
https://pdfs.semanticscholar.org/4669/68c67cbc839a2efa18320746dfad3858f3a0.pdf