Determinants of Tax Performance in Nigeria: An ARDL Analysis of Economic, International, and Financial Factors

Abstract

In the Nigerian context the drop-in oil revenue calls for the need to diversify the economy by improving on the non-oil tax revenue generation means to meet up with contemporary challenges. Also, the shortage of tax revenue due to low budgets in developing countries may be a result of public institution's inefficiencies and economic ills. This study investigated the determinants of tax revenue in Nigeria.  The secondary data was sourced from the Central Bank statistical bulletin and the World development indicators from the period 1991 to 2022. The study employed the Auto-regressive distributed lag, which helps to determine the short-run and long-run relationship between the dependent variable and independent variables. The finding revealed that the GDP per capita has a positive significant effect on tax revenue while the Inflation rate has a negative significant effect on tax revenue both under the economic factors. The international factors of foreign direct investment have a positive significant effect on tax revenue while the financial factor of the loan-to-deposit ratio has a negative significant effect on tax revenue. It therefore concluded that economic factors, international factors, and financial factors selected in this paper, have the peculiarity to improve the tax performance and revenue in Nigeria. Based on this findings it is recommended that the government should enhance fiscal policies through leveraging on the positive impacts of GDP per capita and foreign direct Investment on tax revenue. The challenges posed by inflation and loan-to-deposit ratio could affect the financial stability and intermediation prowess of the institution which would have a long-run impact on the country's tax revenue.