Testing the Causal Nexus Between Tax Revenue and Human Development in Nigeria

Abstract

We examined the effect of tax revenue on human development in Nigeria in this study. To carry out this study, we use Companies’ income tax, petroleum profit tax, value added tax, and customs and excise duties tax revenue on per capita income for the period 1990 to 2021. Ex-post facto research design was employed for the study. Secondary data from the Central Bank of Nigeria (CBN) statistical bulletin, Federal Inland Revenue Service (FIRS) reports and the World Banks database was used. Several statistical and econometric techniques were applied to analyze the data. Findings from the study revealed that tax revenue in the long and short run had an insignificant effect on human development (proxied with per capita income) in Nigeria. Based on the findings, it was recommended that government should invest tax revenue on the health system in form of providing adequate health infrastructures, provision of relevant and specialized manpower in the health sector, and provide adequate sensitization on healthy lifestyles that would promote increased life expectancy in Nigeria. Lastly, government should invest tax revenue in creating awareness on the benefits of early child enrolments in schools, provide adequate incentives to motivate teachers to deliver on the job and build conducive learning environments that will encourage students to engage in learning.