Sustainable Value Added Tax (VAT) and Economic Growth of Nigeria

Abstract

This study examined the sustainable value added tax (VAT) and economic growth of Nigeria, using gross domestic product (GDP) as a proxy. Specifically, it analyzed the effect of VAT on imports, exports, and non-oil revenue between 2015 and 2024. An ex-post facto research design was adopted, relying on secondary data obtained from the Central Bank of Nigeria (CBN), Federal Inland Revenue Service (FIRS), and the National Bureau of Statistics (NBS). The study employed the Ordinary Least Squares (OLS) regression model, alongside descriptive and diagnostic tests, to ensure robustness of the analysis. The regression results revealed that VAT on imports (Coef. = 0.164921, p = 0.0007), VAT on exports (Coef. = 1.074247, p = 0.0026), and VAT on non-oil revenue (Coef. = 0.030672, p = 0.0278) all exerted positive and statistically significant effects on GDP at the 5% significance level. The model achieved an Adjusted R² of 0.999860, F-statistic of 21445.78 with Prob(F-stat) = 0.000000, and a Durbin-Watson statistic of 1.82, confirming strong explanatory power and absence of autocorrelation. The study concludes that sustainable VAT is a vital fiscal tool for diversifying revenue sources, enhancing trade performance, and stimulating Nigeria’s long-term economic growth.