INDIRECT TAXES AND ECONOMIC GROWTH OF NIGERIA - THE REVENUE DIVERSIFICATION AGENDA

Abstract

Achieving sound economic growth is one of the major priorities of economic regulators. Nigeria economy majorly built on oil revenue in which unpredictability nature of the oil sector might adversely affected economic growth. Indirect taxes serve as the diversification means of generating revenue for an economy, but Nigeria economy has been characterized with challenges of high level of tax gap, mono-dependent oil revenue generation and weak tax system. These challenges have created problem of poor indirect tax revenue generation and deterioration in Nigeria economic growth rate. The objective of the study is to examine the effect of indirect taxes (VAT) and (CED) as economic revenue diversification on Nigeria economic growth in Nigeria. The study used expost facto research design with focused on RGDP, VAT, CED, interest rate and exchange rate in Nigeria within the period of 1995-2019. Autoregressive Distributed Lag (ARDL) method of analysis was employed, while unit root test was carried out among study variables and results shown that there were mixed levels of stationarity. Finding revealed that the short-run model indicated that CED, INT and EXR were major short-run determinants of Nigeria economic growth, while VAT was not short-run determinants of economic growth. Also, finding established that long run estimates established that, VAT, CED and INT show positive signs, indicating they influence RGDP positively while EXR has negative effect on GDP . The study concludes that both in the short and long runs VAT, CED, INT and EXR affect Nigeria economic growth. The study recommends that for an economy to achieve growth government should ensure that VAT, CED and INT are not highly charged on investors and consumers when buying products and services, acquiring raw materials from other countries, and seeking loan in the bank.