IMPACT OF VALUE ADDED TAX (VAT) REVENUE ALLOCATION ON ECONOMIC GROWTH IN NIGERIA (2004-2024)

Abstract

The study examined the impact of Value Added Tax (VAT) revenue allocation on economic growth in Nigeria. It specifically examined the impact of federal government’s, state governments’ and local governments’ VAT revenue allocation on economic growth in Nigeria spanning from the periods of 2004 to 2024. The study adopted the ex-post facto research design thereby making use of secondary data which were collected from the Central Bank of Nigeria (CBN) Statistical Bulletin and the Federation Account Allocation Committee (FAAC) Reports for the periods studied. The characteristics of data collected were analysed with descriptive statistics test and correlation test while multiple regression analysis anchored on the Ordinary Least Square (OLS) model was used to test the hypotheses formulated for the study with the aid of E-View 10 Version. The findings of the study revealed that there is a non-significant negative impact of federal government share and state governments’ share of the VAT revenue allocation on economic growth in Nigeria while local government share of VAT revenue has a non-significant positive impact on economic growth in Nigeria. This implies that revenue from VAT has not effectively transformed into any tangible improvements in the economic growth of the country. It is therefore concluded that increase in VAT revenue allocations does not guarantee improved economic well-being of the country. It was recommended among others that the federal government should channel the allocated revenue to infrastructural network to encourage individual to engage in economic activities in order to boost the economic growth of the country.