Summary
of Findings
This research work evaluates the impact of taxation on
foreign direct investment in Nigeria. Taxation was captured by Company Income
Tax and Value Added Tax (VAT). The statistical techniques employed, surfaced
the following results;
(i) Taxation has significant impact on economic growth in
Nigeria within the period under study; 1994-2010.
(ii) The entire regression plane is statistically
significant. This means that the joint influence of the explanatory variables
(CIT and VAT) on the dependent variable (FDI) is statistically significant;
(iii) The computed coefficient of multiple determination (R2
= 0.945401) shows
that 94.54% of the total variations in the dependent variable (FDI) is
accounted for, by the variation in the explanatory variables namely Company
Income Tax (CIT) and Value Added Tax (VAT).
(iv) The total variation of 5.46% of the total variation in
the dependent variable is attributable to the influence of other factors not
included in the regression model.
(v) There is inconclusive
evidence regarding the presence or absence of positive first-order serial
correlation (autocorrelation) in the model.
CONCLUSION
FDI is one of the most important strategies for the promotion of
economic growth and development in Nigeria. FDI can serve as an engine of
growth by increasing the opportunity for their integration into global
financial and capital flows, expand employment and exports base, generate
technological capability-building and efficiency spillovers to local firms, as
well as establish investment arrangements that increase the potential of host
countries for economic growth.
However, taxation is
another factor which can promote FDI in a country. Thus, the primary function
of a tax system is to raise revenue for the government for its public
expenditure. So the first goal in the development strategy as regards taxation
policy is to ensure that this function is discharged adequately.
· To reduce inequalities
through a policy of redistribution of income and wealth. Higher rates of income
taxes, capital transfer taxes and wealth taxes are some means adopted for
achieving these ends.
· To ensure economic goals
through the ability of the taxation system to influence the allocation of
resources.
RECOMMENDATIONS
In the light of the
research findings, the following recommendations are presented;
·
To ensure
increased foreign investment inflow into the economy and to reinforce the gains
of the economic policy measures, the Nigerian investment promotion decree
should be promulgated and repealed.
·
Government should
adopt tax policies that will not endanger the activities of foreign investors
in the Nigeria.
· A taxation system must be
as simple as possible with a few taxes and uncomplicated legislation.
·
Having seen that taxation exert influence on FDI, foreign Investment
should be boosted through conscious provision of necessary tax management
framework that will lower the costs of doing business in Nigeria.
·
To increase the
level of savings and capital formation in the economy, the government should
enhance foreign investment activities.
·
There is every
need for government to protect local industries from foreign competition
through the use of import duties, turnover taxes/VAT and excises. This has the
effect of transferring a certain amount of demand from imported goods to
domestically produced goods.
DATA FOR ANALYSIS
YEAR
|
FDI
(
|
CIT
(
|
VAT
(
|
1994
|
22229
|
201911
|
7260.8
|
1995
|
75941
|
459987
|
20761
|
1996
|
111295
|
523597
|
31000
|
1997
|
110453
|
582811
|
34000
|
1998
|
80750
|
463609
|
36900
|
1999
|
92793
|
949188
|
47100
|
2000
|
115952
|
1906.2
|
58500
|
2001
|
132481
|
2231.6
|
91800
|
2002
|
225225
|
1731.8
|
108600
|
2003
|
258389
|
2575.1
|
136400
|
2004
|
248225
|
3920.5
|
159500
|
2005
|
302753
|
5547.5
|
178100
|
2006
|
573835
|
5965.1
|
221600
|
2007
|
627024
|
5715.6
|
230800
|
2008
|
693841
|
6246.7
|
241800
|
2009
|
718356
|
7091.2
|
265700
|
2010
|
750728
|
7283.7
|
301400
|
SOURCE: CBN
STATISTICAL BULLETIN, VOLUME 21, 2010
APPENDIX II
REGRESSION RESULTS
Dependent Variable: FDI
|
||||
Method: Least Squares
|
||||
Date: 05/09/12 Time: 11:27
|
||||
Sample: 1994 2010
|
||||
Included observations: 17
|
||||
Variable
|
Coefficient
|
Std. Error
|
t-Statistic
|
Prob.
|
C
|
-78795.31
|
42664.51
|
-1.846859
|
0.0860
|
CIT
|
0.117191
|
0.074748
|
1.567819
|
0.1392
|
VAT
|
2.809989
|
0.225322
|
12.47100
|
0.0000
|
R-squared
|
0.942079
|
Mean dependent var
|
302368.8
|
|
Adjusted R-squared
|
0.933804
|
S.D. dependent var
|
259443.2
|
|
S.E. of regression
|
66750.94
|
Akaike info criterion
|
25.21411
|
|
Sum squared resid
|
6.24E+10
|
Schwarz criterion
|
25.36115
|
|
Log likelihood
|
-211.3199
|
F-statistic
|
113.8537
|
|
Durbin-Watson stat
|
1.013422
|
Prob(F-statistic)
|
0.000000
|
|
Dependent Variable:
LOG(FDI)
|
||||
Method: Least Squares
|
||||
Date: 05/09/12 Time: 11:28
|
||||
Sample: 1994 2010
|
||||
Included observations: 17
|
||||
Variable
|
Coefficient
|
Std. Error
|
t-Statistic
|
Prob.
|
C
|
-0.204244
|
1.288253
|
-0.158544
|
0.8763
|
LOG(CIT)
|
0.074878
|
0.038189
|
1.960696
|
0.0701
|
LOG(VAT)
|
1.027958
|
0.086348
|
11.90487
|
0.0000
|
R-squared
|
0.945401
|
Mean dependent var
|
12.21022
|
|
Adjusted R-squared
|
0.937601
|
S.D. dependent var
|
0.999560
|
|
S.E. of regression
|
0.249689
|
Akaike info criterion
|
0.221581
|
|
Sum squared resid
|
0.872822
|
Schwarz criterion
|
0.368619
|
|
Log likelihood
|
1.116559
|
F-statistic
|
121.2065
|
|
Durbin-Watson stat
|
1.062085
|
Prob(F-statistic)
|
0.000000
|
|