THE EFFECT OF TAX REVENUE ON ECONOMIC GROWTH IN NIGERIA (1987-2018)

BY

ONYECHI CHIKA BLESSING

MATRIC NO: 160901519

A PROJECT SUBMITTED TO THE DEPARTMENT OF ECONOMICS, UNIVERSITY OF LAGOS, NIGERIA, IN

PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF BACHELOR OF SCIENCE DEGREE IN
ECONOMICS. NOVEMBER, 2019
 CERTIFICATION

This is to certify that this research work was carried out by Onyechi Chika Blessing, with matric number
160901519, of the Department of Economics, University of Lagos.

MRS AJAYI A.A

(Supervisor) DATE

PROF.DAUDA, RISIKAT OLADOYIN SUNMOLA DATE

ACKNOWLEDGEMENT.

All honour, glory, thanks and adoration be unto God Almighty for His mercy, wisdom, knowledge,
understanding and guidance who made this process a success. My humble appreciation also goes to
my supervisor, Mrs Ajayi A.A., for her guidance, correction, patience and supervision all the way
which made this work a success.

I also owe special thanks to my Head of Department, Prof Dauda Risikat Oladoyin Sunmola, other
lecturers in the Department, Prof Nwokoma Ndubuisi, Prof. Saibu Muibi Olufemi, Prof(mrs) Lawanson
Olukemi Iyabode, Dr Odior Ernest Simon Osiklena, Dr(mrs) Margaret Loto, Dr Omojolaibi Joseph
Ayoola, Dr Egunjobi Titilayo Adenike, Dr Oke David Mautin, Dr Ojapinwa Taiwo Victor, Dr Ogunniyi
Matthew Babatope, Dr Ajide Kazeem Bello, Dr Odeleye Anthonia Taiye, Dr Mrs Nwakeze Ngozi Mary,
Dr Ayadi Folorunsho Sunday, Dr Shittu Ayodele Ibrahim,Dr Jean Balouga, Dr Ajuwon, Mrs Ajayi, Mr
Buchi, Mr Gift for their contribution to building my academic life.

Words fail me to appreciate my beloved Mother, Mrs Onyechi to whom I owe all that I have achieved
thus far, for her prayers, love, encouragement, and financial support. I’m also grateful to my siblings,
Chidera and Daniel, for their love and support. May the good Lord keep them alive to reap the fruits
of their labour.

Finally, my gratitude also goes to my friends, Jamaal, Sodiq, Ruby, Jasper, Ude, Tochi, Olamide,
Demola, Juwon, Busola, and many others whom time and space may not allow me to mention their
names. God bless you all.

ABSTRACT
 The aim of this study was to examine the impact of tax revenue collected by federal
government on the economic growth of Nigeria for a period of 30 years (1987-2018), while
looking at the specific objectives which include: examining the trend of tax revenue in Nigeria;
examine the relationship between tax revenue and economic growth in Nigeria. Secondary
data were obtained from FIRS and Bureau of Statistics for the purpose of this research. This
research hypothesizes that tax revenue has no significant relationship with economic growth in
Nigeria. To test this hypotheses, the study employed the Autoregressive distributed lag (ARDL)
model to determine the effect of tax revenue,government independent revenue and foreign
direct investment on GDP of Nigeria , the Bounds Co-integration test was employed to test for
the presence of a long run relationship between the dependent and independent variables.

In summary, the simple regression analysis shows that there has been an upward trend of tax
revenue on the Nigerian economy between 1987-2018.

Also, there is a positive relationship between tax revenue,government independent revenue,

foreign direct investment and economic growth in Nigeria, but the impact of these variables on
economic growth are all insignificant.

Therefore it is recommended that government should ensure the tax revenue generated are
channeled toward building capital stock that can create more jobs which will generate more
revenue to government through other forms of tax, and also use tax policy more as a
macroeconomic policy not just as a tool for revenue generation as this will result to long run
sustain economic growth and tax revenue.

KEYWORDS: Tax Revenue, Government Independent Revenue, Foreign Direct Investment, Gross
Domestic Product, Economic Growth