Nigeria's persistent fiscal underperformance, characterised by one of the lowest tax-to-GDP ratios in sub-Saharan Africa, poses a fundamental constraint on its long-term economic growth trajectory. Despite recent institutional reforms by the Federal Inland Revenue Service (FIRS) and the implementation of the Finance Acts of 2019, 2020, 2021, 2022, and 2023, there remains a conspicuous gap in the empirical literature on how sectoral tax revenue effort — disaggregated into petroleum profit tax, company income tax (CIT), and value-added tax (VAT) — translates into meaningful gains in economic output. This study examines the impact of tax revenue effort on economic growth in Nigeria over the period 1989–2023, employing a rigorous panel regression framework augmented with five clusters of control variables: demographic factors (DF), macroeconomic factors (MF), institutional factors (INSF), global factors (GF), and infrastructural factors (INFF). Utilising pooled ordinary least squares (OLS), fixed-effects model (FEM), random-effects model (REM), and system generalised method of moments (System GMM) estimators to account for endogeneity and dynamic dependencies, the study finds that non-oil tax effort exerts the strongest and most statistically significant positive effect on GDP growth (β = 0.489, p < 0.01), followed by the composite tax revenue effort index (β = 0.358, p < 0.01). Petroleum profit tax effort is statistically insignificant, consistent with resource curse and Dutch Disease theories. Rule of law, infrastructure quality, and trade openness are among the most consequential control variables, underscoring that fiscal effort alone is insufficient without parallel institutional and structural improvements. The findings are robust to a battery of post-estimation diagnostics, including cointegration tests, serial correlation correction, and instrument validity checks. The study concludes that broadening the non-oil tax base and strengthening revenue collection institutions are critical levers for sustainable economic expansion in Nigeria.
Prof Onipe Adabenege Yahaya (Sun,) studied this question.