An Empirical Study on the Causality between Economic Growth and Taxation in Nigeria

This study examines the causality between economic growth and taxation in Nigeria for the period 1970-2009. To achieve the objective of the study, data was collected from the Central Bank of Nigeria (CBN) Statistical Bulletin and Federal Inland Revenue Service (FIRS). The data collected from the secondary sources were analysed using relevant econometric models such as Augmented Dickey-Fuller, Diagnostic Tests, Granger Causality and Johansen Co-integration. The results from the econometric analysis reveals that taxation as an instrument of fiscal policy affects the economic growth and taxation granger cause economic growth of Nigeria. On the basis of the econometric result, the study concluded that taxation is a very important instrument of fiscal policy that contributes to economic growth of any country. On the basis of the conclusion useful recommendations were provided that will improve the generation of revenue from taxation that would stimulate the economy of Nigeria positively.