EFFECT OF TAX REVENUE ON FISCAL SUSTAINABILITY IN NIGERIA

This study examines the effect of tax revenue on fiscal sustainability in Nigeria from 2016 to 2024. Using an ex post facto research design, we extracted quarterly time series data from the FIRS annual report and the Central Bank of Nigeria’s statistical bulletin 2024, and we used the OLS estimation test based on the unit root test result. The dependent variable was proxied by the debt-to-GDP ratio, while the independent variable was proxied by company income tax (CIT), petroleum profit tax (PPT) and value added tax (VAT). The results showed that company income tax and petroleum profit tax had a significant negative effect on the debt-to-GDP ratio in Nigeria, while value-added tax had a significant positive effect on the debt-to-GDP ratio in Nigeria. Therefore, the study recommended that company income tax shows that by expanding the tax system, tax avoidance and evasion can be reduced by improving the government’s ability to generate more revenue. Cutting CIT may spur private investment, boost employment, and raise GDP over time. The government should minimize or find ways to eliminate the widespread corruption and leakages in the PPT administration with sufficient tax reforms. A well-balanced PPT can strengthen government revenue and reduce debt dependency. With regard to VAT, a downward review of the VAT should be conducted, from the current 7.5% to about 6% on essential goods in other to help reduce the debt-to-GDP ratio by boosting non-oil revenue, which will help decrease the burden on low-income households.