Multinational Corporations transfer Pricing Policies and Economic Growth in Nigeria

Abstract

With Nigeria's abundant natural resources the control of a substantial portion of oil production by multinational corporations (MNCs) raises concerns about transfer pricing manipulation. Part of revenue leakages of the government in Nigeria which are needed to boost economic growth can be attributed to tax evasion practices by MNCs through their transfer pricing activities. Studies that focused on tax evasion practices of MNCs such as sharp practices in the area of transfer pricing practices in Nigeria are scarce. This study examined the effect of multinational corporations transfer pricing policies, corruption and economic growth in Nigeria from 1986 to 2022. The study adopts an ex-post factor research design, utilizing an autoregressive distributed lag modelling and bound testing cointegration as the estimation techniques. The inferences were made at 5% significant level. The inferences were made at 5% significant level. The findings revealed that domestic non-oil revenue shows a significant and positive effect on Gross Domestic Product, suggesting a potential positive association between domestic non-oil revenue and Gross Domestic Product over the long term. In the short run lagged differences in Gross Domestic Product exhibit a positive and marginally significant coefficient, suggesting a persistence effect. In conclusion, in the examination of transfer pricing policy on Gross Domestic Product, the long-run estimates reveal a significant effect of transfer pricing on Gross Domestic Product (Adj. R2= 0.229, F (4,37) = 30.94, p< 0.05)), The study concluded that transfer pricing contributes valuable insights to the on economic growth in Nigeria. The study recommended that policy maker should center on promoting transparency and fairness in multinational corporations' transfer pricing practices through the implementation of stringent regulations and monitoring mechanisms, collaboration between domestic and international tax authorities to detect and deter potential manipulations, and the fostering of international cooperation to establish standardized guidelines, aiming for an equitable and consistent approach across jurisdictions.