Effect of Taxation on Nigerian Economic Development

Abstract

This study investigates the impact of taxation on economic growth in Nigeria, focusing on Value Added Tax (VAT), Company Income Tax (CIT), and Personal Income Tax (PIT) over the period 2020–2024. An ex post facto research design was adopted, and secondary data were analyzed using regression techniques, with Gross Domestic Product (GDP) serving as a proxy for economic growth. The findings reveal that VAT and PIT exert positive but statistically insignificant effects on GDP, indicating their limited contribution to economic growth within the study period. In contrast, CIT shows a negative and marginally insignificant relationship with GDP, suggesting that corporate taxation may hinder investment and reduce economic performance when inefficiently structured. Overall, the results indicate that the Nigerian tax system has not effectively translated revenue generation into sustainable economic growth. The study concludes that structural inefficiencies, narrow tax bases, weak compliance, and poor revenue utilization constrain the effectiveness of taxation in Nigeria. It recommends reforms aimed at improving tax administration, broadening the tax base, and enhancing transparency and accountability in public revenue management.