TAX REVENUE AND ITS IMPACT ON NIGERIA'S ECONOMIC GROWTH

This research examines the relationship between tax revenue components and economic growth in Nigeria, using quarterly data from 1994 to 2022. The research investigates three primary tax components: Petroleum Profit Tax (PPT), Value Added Tax (VAT), and Other Tax Revenue (OTH), employing an Autoregressive Distributed Lag (ARDL) model to analyze both short-run and long-run relationships. Data was sourced from Central Bank of Nigeria’s bulletins, National Bureau of Statistics, etc. The findings reveal a significant positive relationship between overall tax revenue and economic growth, with a 1% increase in total tax revenue leading to a 0.234% increase in GDP growth. Among the tax components, VAT demonstrates the strongest positive impact (0.289%), followed by Other Tax Revenue (0.178%) and PPT (0.156%). The error correction term (-0.567) indicates that approximately 56.7% of any disequilibrium is corrected within one year, suggesting efficient adjustment mechanisms. The study's diagnostic tests confirm the models' statistical validity, with high R-squared values and no significant issues of serial correlation or heteroskedasticity. Based on these findings, the study recommends enhancing VAT administration, expanding the tax base, modernizing tax collection systems, and implementing strategic reforms to diversify revenue sources beyond petroleum. These results have important implications for tax policy formulation in Nigeria, particularly in the context of economic diversification efforts and sustainable development goals.