Taxation and Balance of Payments in Nigeria (1970 – 2008)

Abstract

This paper examines the implication of using taxation to manage the Nigerian Economy and the influence of such measure on macroeconomic aggregates, especially balance of payments over the period 1970 - 2008. The analysis was carried out using both descriptive and inferential statistical techniques. The Ordinary Least Square (OLS) method was used for the estimations. Our findings indicate that the historical trends in balance of payments showed no significant response to tax policy. A positive relationship between tax policy and balance of payments was obtained, which is in line with the theory, but with insignificant coefficient. Further, we found that taxation was not effective in tackling balance of payments problems in the economy during the period of study largely because of inconsistency in the use of tax measures. Among other recommendations, the paper submits that Nigeria should apply tax measures much more carefully than was observed over the period studied.