The contribution of taxation to any economy globally cannot be overemphasized. Apart from the revenue function it performs for the government, it is also used to assist the national government to achieve the country’s macro-economic objectives in the areas of fiscal and monetary policies. Thus the main objective of this study is to explore the role of revenue mobilization on economic growth and development in Nigeria.

Time series data was applied in carrying out this research work. Multiple Linear Regression analysis was used to analyze the data by employing d use of Vector Error Correction Model.

Results showed that there is a positive relationship between the contribution of taxes and GDP and that tax revenue has a great impact on the GDP of Nigeria. It can therefore be said that there is a strong positive relationship between the contribution of revenue from taxes and GDP as shown in the result presented. This signifies that tax revenue has a very high impact on the economic growth of Nigeria as a source of revenue available to government for the purpose of Growth and development.




  • Background to the Study

Government revenue refers to the revenue received by a government to finance its operations and development projects. It is an important tool of the fiscal policy of the government as it facilitates government spending (OECD, 2008b). Governments need to perform various functions in the field of political, social and economic activities to maximize social and economic welfare. In order to perform these duties and functions government require large amount of resources. These resources are called Public Revenues. Public revenue consists of taxes, revenue from administrative activities like fines, fees, gifts and grants. Public revenue can be classified into two types including: tax and non-tax revenue (Illyas and Siddiqi, 2017). Taxes are the first and foremost sources of public revenue. Taxes are compulsory payments to government without expecting direct benefit or return by the tax payer. Taxes collected by Government are used to provide common benefits to all mostly in form of public welfare services. Taxes do not guarantee any direct benefit for person who pays the tax. It is not based on direct quid pro quo principle. The government collects tax revenue by way of direct & indirect taxes. Direct taxes includes; Corporate tax; personal income tax, capital gain tax and wealth tax. Indirect taxes include custom duty, central excise duty, Value Added Tax (VAT) and service tax (Chaudhry and Munir, 2017). Non tax revenue refers to the revenue obtained by the government from sources other than tax. These include fees, fines and penalties, surplus from public enterprises, special assessment of betterment levy, grants and gifts and deficit financing.

Fiscal policy aligning government revenue and expenditure is of crucial importance in promoting price stability and sustainable growth in output, income and employment which are important parameters of economic growth (Ahmed, 2017). It is one of the macroeconomic policy instruments that can be used to prevent or reduce short-run fluctuations in output, income and employment in order to move an economy to its potential level. However, for sound fiscal policy, a good understanding of the relationship between government revenue and economic growth of a nation is very important, for instance, in addressing government’s budgetary deficits. Government collects tax revenues, provides goods and services not produced by the private sector, engages in commercial-type activities, makes cash and in-kind transfers to families and businesses, and pays interest on its debts (Abiola and Asiweh, 2012). All these activities require that government raise enough revenue. Governments raise revenue from different sources in order to undertake its development agendas (Ahmed, 2017). A country’s revenue structure determines who pays for public services and goods. By spreading revenues across different instruments, countries can distribute the burden across particular groups of citizens and sectors of the economy. In all OECD member countries, taxes other than social contributions represent the largest share of government revenues.

Revenue is defined as all amounts of money received by a government from external sources for example those originating from “outside the government” net of refunds and other correcting transactions, proceeds from issuance of debt, the sale of investments, agency or private trust transactions, and intergovernmental transfers ((Ahmed, 2017). Government Revenue comprises amounts received by all agencies, boards, commissions, or other organizations categorized as dependent on the government concerned. Stated in terms of the accounting procedures from which these data originate, revenue covers receipts from all accounting funds of a government, other than intra-governmental service (revolving), agency, and private trust funds (Chaudhry and Munir, 2017).

Ayres and Warr (2006) define economic as ‘a rise in the total output (goods or services) produced by a country’. It represents an increase in the capacity of an economy to produce goods and services, compared from one period of time to another. Economic growth refers only to the quantity of goods and services produced. Economic growth can be measured in nominal terms including inflation, or in real terms, which are adjusted for inflation like by the percent rate of increase in the gross domestic product (GDP). Economic growth measures growth in monetary terms and looks at no other aspects of development (Illyas and Siddiqi, 2017). Economic growth can be either positive or negative. Negative growth can be referred to by saying that the economy is shrinking. Negative growth is associated with economic recession and economic depression (King and Levine, 1993). Gross national product (GNP) is sometimes used as an alternative measure to gross domestic product. In order to compare multiple countries, the statistics may be quoted in a single currency, based on either prevailing exchange rates or purchasing power parity. Then, in order to compare countries of different population sizes, the per capita figure is quoted (Beck and Web, 2003).


Economies with large public sectors will grow slowly because of large tax wedges but a lack of growth-enhancing government initiatives may stymie growth in countries with very small governments (Barker, Buckle and St Clair, 2008). However, not all expenditure and methods of financing have the same impacts on economic growth. While economic research suggests that the cumulative effect of taxes on economic growth is moderate, recent research (OECD, 2008b) has suggested that there is a relationship between the types of taxes imposed and economic growth. Several research studies have been conducted on government revenue and economic development. In Nigeria, people, especially the rich and the elites, deliberately dodge this civic responsibility of paying tax and sometimes employ the service of tax specialists in order to pay less tax to the government. There is also the problem of falsification of ages and the number of children and dependents one has in order to reduce the amount of tax payable. Emanating from these factors, the sub-national governments (state and local governments) contend that their currently assigned taxes are poor in terms of their bases and, therefore, accruable revenues are not enough to meet their expenditure targets. Also the statutory allocation from the federation account has been grossly inadequate as a result of a fall on gross domestic product. This invariably reduces their overall performance, considering their expenditure profiles. Taiwo (2008) observed that the distribution of government revenue is skewed in favor of one tax base or the other (eg oil revenue) in Nigeria. Nevertheless, the overwhelming evidence of positive impact of oil revenue on economic growth in Nigeria cannot be overemphasized (Odusola, 2006). However, the first question is, are other forms of taxes not important for consideration? Emanating from the above, there are some questions to ask: what relationship exists between Nigeria’s tax revenue and her economic growth? And what is the contribution from other tax base to the overall tax revenue of a nation.


Broadly, the objective of this study is to investigate the impact of role of revenue mobilization on economic growth from 1991-2017. Other specific objectives include:

  • Determine the impact of tax on economic growth in Nigeria
  • To investigate the impact of tax mobilization on the growth of the economy of Nigeria.


The following research questions are formulated to guide the study:

H01: Taxation does not have any significant impact on the growth of the Nigerian economy.

H02: Company Income Tax has no significant impact on Nigerian economic growth.

H03: Value Added Tax has no significant impact on Nigerian economic growth.


This study would be significant to several stakeholders:

To scholars and academicians, this study would increase body of knowledge to the scholars in the area of government revenue and economic development. It would also suggest areas for further research so that future scholars can pick up these areas and study further. The study would be important to the government especially the Ministry of Finance for making policy decisions whose overall objectives is to influence the level of economic activity and Government revenue in line with the expanding Government budget. Finally, the findings of this study would be important to policy makers especially on matters concerning taxation and budgeting so as to have manageable budgetary deficits.


This research work covers Nigeria as a whole, the problems, effect and the role of Revenue mobilization on economic growth and development will be deeply investigated on in this research.

The scope of this study covers the impact of tax revenue on the Nigerian economic growth over a period of 31 years (from 1991-2017). The trends of Company Income tax are examined for the period to determine their correlation with the Nigerian economy which will be captured as Gross Domestic Product (GDP). The focus will be based on data obtained at the Federal Inland Revenue Service (FIRS).

However, in the course of carrying out this research work, the researcher can foresee some limitations which include; insufficient financing, insufficient data for the research work and the time required for the project to be concluded.


Definition of VAT

VAT is a consumption Tax levied at each stage of the consumption chain and borne by the final consumer of product or service. Oserogho& Associates (2011)

FINANCE: The management of large amounts of money, especially by governments or large companies.

FINANCIAL MANAGEMENT: Financial management is defined as the act of total management function concerned with the effective and efficient raising and use of funds. As processes and responsibility, financial management consists of decision making regarding the following major activities among others.

  1. Determination of funds requirement of the organization revenue generation and mobilization.
  2. Seeking and obtaining the right amount of funds at the right time for cash flow management
  3. Deploying available funds to the needs of the organization revenue application and control, and
  4. Giving proper stewardship for funds obtained and utilized (Abubakar, 1999)

INTERNALLY GENERATED REVENUE (IGR): This refers to the revenue or money collected by the local government from its internal sources (within the Local Government Area). The internal sources of revenue comprise many major and miscellaneous items aggregated to provide the required fund for financing the enormous functions ascribed to local government as third tier of government (Abubakar, 1999).




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