TAXATION AND MACROECONOMIC PERFORMANCE IN NIGERIA

This study examines the effects of taxation on
macroeconomic performance in Nigeria using the
Autoregressive Distributed Lag (ARDL) modelling
framework. Macroeconomic performance is measured by
per capita gross domestic product and inflation, while
taxation is disaggregated into value added tax, company
income tax, customs and excise duties, and petroleum
profit tax, with the exchange rate included as a control
variable. The results confirm the existence of a stable
long-run relationship between taxation and
macroeconomic performance in Nigeria. In the short run,
value added tax and customs and excise duties exert
positive and statistically significant effects on economic
growth, whereas company income tax has a negative
effect. In the long run, value added tax remains growthenhancing, while company income tax and exchange rate
depreciation significantly constrain economic growth.
Petroleum profit tax is positive but statistically
insignificant in both the short and long run. With respect
to inflation, the findings reveal that the effects of
taxation vary across tax types and time horizons. In the
short run, value added tax and customs and excise duties
significantly reduce inflation, indicating their moderating
influence on price pressures. Conversely, company
income tax exerts a significant inflationary effect in the
short run, reflecting cost-pass-through effects, while
petroleum profit tax remains insignificant. In the long
run, customs and excise duties significantly increase
inflation, suggesting persistent cost-push effects, whereas value added tax continues to exert a
disinflationary influence. Company income tax and
petroleum profit tax do not have significant long-run
effects on inflation, indicating limited enduring influence
on price dynamics. The study concludes that indirect
taxation supports economic growth in Nigeria, while
excessive corporate taxation and macroeconomic
instability hinder long-term development. Policy
recommendations emphasize tax structure reform,
investment-friendly corporate taxation, efficient revenue
utilization, and exchange rate stability.