Does Foreign Direct Investment Spur Tax Revenue Mobilization? A Linear Autoregressive Distribution Lag (ARDL) Versus a Non- Linear Autoregressive Distribution Lag (NARDL) Analysis of the Nigerian Case

Abstract

This study examined the impact of foreign direct investment on tax revenue in Nigeria. Annual time series data from 1987 to 2026 collected from various sources were used in this study. The results of the ARDL Bounds Test showed that FDI had a statistically significant positive effect on tax revenue for the short run; but on the long run, the result was statistically and positively insignificant. For the NARDL model where the variables are divided into positive (POS) and negative (NEG) changes, FDI_POS is negatively significant while FDI_NEG is insignificant with respect for the long run results. With respect to the short run results of NARDL, while FDI_POS is insignificant; FDI_POS (-1); FDI_NEG and FDI_NEG (-1) contribute significantly to tax revenue. The overall results support the general hypothesis that there is a strong link between foreign direct investment and tax avoidance. The study concludes with some recommendations.