Empirical Analysis of the Impact of Taxes on Foreign Direct Investment in Nigeria

Innocent N. Umezurike¹ , Charity Onyekachi-Onyele² , Innocent O. Nwagwu³

Section:Research Paper, Product Type: Journal-Paper
Vol.12 , Issue.3 , pp.27-38, Sep-2024

Online published on Sep 30, 2024

Copyright © Innocent N. Umezurike, Charity Onyekachi-Onyele, Innocent O. Nwagwu . This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
 

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Abstract :
An economy needs foreign direct investment (FDI) to grow, especially in rising markets like Nigeria, which mostly depends on the earnings from the sale of crude oil on the global market. The current tax laws in a nation have a significant impact on the amount of foreign direct investment that enters that economy. Thus, the purpose of this study was to investigate how taxes impact FDI in Nigeria. An ex post facto study design was used since pertinent data was taken from World Development Indicators (WDI) and other Federal Inland Revenue Service (FIRS) annual publications covering the years 1999–2023, which saw a number of important tax developments. The autoregressive distributed lag (ARDL) technique was used in the study to estimate the variables` relationships. The findings showed that while value-added tax (VAT) and petroleum profit tax (PPT) did not have a substantial long-term impact on FDI, personal income tax (PIT) and corporate income tax (CIT) did have an inverse and considerable influence on FDI. All of the tax-related factors that were examined in the short term were shown to be significant, suggesting that taxes had an immediate effect on FDI. The study`s conclusion indicated that VAT, CIT, PPT, and PIT collectively had a major impact on FDI in Nigeria, as indicated by the coefficient of determination of the regression. In order to boost FDI, it was suggested that the government implement comprehensive tax reform.

Key-Words / Index Term :
Tax, FDI, Personal Income Tax, Corporate Income Tax, Petroleum Profit Tax, Value Added Tax, ARDL, Nigeria

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