Tax Incentives and Investment Growth: The Nigerian Perspective

Journal of Economics and Business, Vol.3 No.1, 2020

12 Pages Posted: 9 Apr 2020

See all articles by Chukwuma C. Ugwu

Chukwuma C. Ugwu

Federal University Wukari, Nigeria

Iyana E. Okwa

Federal University Wukari, Nigeria

Ernest E. Inyang

Federal University Wukari, Nigeria

Date Written: March 13, 2020

Abstract

Tax Incentives and Investment Growth: the Nigeria perspective is aimed at determining the effect of tax incentives represented by corporate income tax rate and investment allowance on investment growth in Nigeria from 1985-2018. The study adopted Ex Post Facto Research Design and time-series data was used. Relevant secondary data for this study were collected from the Central Bank of Nigeria (CBN) Statistical Bulletin, the National Bureau of Statistics (NBS) and the Federal Inland Revenue Service (FIRS). The study employed ordinary least square estimation and used regression analysis to test the relationship between Tax Incentives and investment growth in Nigeria. The study shows that tax incentive policy is positively and significantly related to gross fixed capital formation. The findings showed that tax incentives have positive impact on gross fixed capital formation. The findings showed that there is a degree of relationship between corporate income tax and gross fixed capital formation; and that there is degree of co-variability between investment allowance and gross fixed capital formation in Nigeria. The result also indicates that a higher company income tax rate is associated with lower private investment and slower gross fixed capital formation. The implication of this finding is that since tax incentives represented by company income tax allowance and investment allowance have positive and significant impact on gross fixed capital formation, policy reform in other factors that affect investment growth is needed also to complement these incentives so that a better result can be achieved.

Keywords: Tax Incentives, Investment Growth, Corporate Income Tax, Investment Allowance

Suggested Citation

Ugwu, Chukwuma C. and Okwa, Iyana E. and Inyang, Ernest E., Tax Incentives and Investment Growth: The Nigerian Perspective (March 13, 2020). Journal of Economics and Business, Vol.3 No.1, 2020, Available at SSRN: https://ssrn.com/abstract=3554242

Chukwuma C. Ugwu (Contact Author)

Federal University Wukari, Nigeria

20, Katsina Ala Road
PMB 1020
Wukari, Taraba State. 1020
Nigeria

Iyana E. Okwa

Federal University Wukari, Nigeria

20, Katsina Ala Road
PMB 1020
Wukari, Taraba State. 1020
Nigeria

Ernest E. Inyang

Federal University Wukari, Nigeria ( email )

20, Katsina Ala Road
PMB 1020
Wukari, Taraba State. 1020
Nigeria

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