Moderating Effect of Private Investment on the Relationship Between Tax Revenue and Economic Growth in Nigeria

Ifeoma Florence Okpalanwabude; Emilia Mukaosolu Mgbemena; Chibuike R. Oguanobi

doi:10.59890/ijmbi.v4i1.320

Authors

Ifeoma Florence Okpalanwabude Nwafor Orizu college of education, Nsugbe
Emilia Mukaosolu Mgbemena Chukwuemeka Odumegwu Ojukwu University
Chibuike R. Oguanobi Chukwuemeka Odumegwu Ojukwu University

DOI:

https://doi.org/10.59890/ijmbi.v4i1.320

Keywords:

Private Investment, Tax Revenue, Economic Growth, Nigeria, ARDL

Abstract

This study examined the moderating effect of private investment on the relationship between tax revenue and economic growth in Nigeria using annual time series data from 1994 to 2023. Economic growth was proxied by real GDP (RGDP), while corporate income tax revenue (CITR) and value-added tax revenue (VATR) represented direct and indirect taxes. Private investment (PRIV) was included as both an independent and moderating variable. The Autoregressive Distributed Lag (ARDL) model was employed, supported by unit root and bounds tests, which confirmed a long-run equilibrium relationship among the variables. The long-run results showed that private investment positively strengthened the impact of CITR on economic growth but negatively moderated the effect of VATR. In the short run, CITR, VATR, and private investment had small positive effects on economic growth, while the error correction term indicated a 26.1% speed of adjustment toward equilibrium. Overall, the findings suggest that encouraging private investment enhances the growth benefits of corporate taxation but may reduce the effectiveness of consumption-based taxes, highlighting the need for balanced tax and investment policies.

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