Funding Infrastructure Through Taxation in Nigeria
Authors
Department of Business Administration, Southwestern University, Nigeria (Nigeria)
University of Salford, Manchester (Nigeria)
Department of Business Education, Kogi State College of Education, Ankpa, Nigeria. (Nigeria)
Department of Banking and Finance, University of Nigeria, Enugu Campus. (Nigeria)
Article Information
DOI: 10.51244/IJRSI.2025.12120084
Subject Category: Public Finance
Volume/Issue: 12/12 | Page No: 979-987
Publication Timeline
Submitted: 2025-12-24
Accepted: 2026-01-02
Published: 2026-01-07
Abstract
Infrastructure remains a critical determinant of sustainable development, and in Nigeria, the widening infrastructure deficit poses significant challenges to economic growth. This study investigates the role of taxation in bridging infrastructure deficits in Nigeria between 1999 and 2023. The general objective is to assess the effect of taxation on infrastructure deficit, with specific emphasis on the impact of value added tax (VAT), company income tax (CIT), and petroleum profit tax (PPT). The study identifies important research gaps in literature, including temporal, geographical, variable, and methodological limitations. Prior studies have relied on outdated datasets, non-Nigerian contexts, and narrow tax variables, while often depending on primary data. To address these gaps, this research adopts a broader temporal scope and utilizes secondary time series data obtained from the World Development Indicators and the Federal Inland Revenue Service. Employing an ex post facto research design and the Autoregressive Distributed Lag (ARDL) estimation method, the study rigorously analyzes the relationship between taxation and infrastructure deficit. Findings reveal that VAT has a negative and significant effect on infrastructure deficit (Coefficient = -0.40, p-value = 0.0012), while CIT and PPT exert positive and significant effects (Coefficient = 0.20, p-value = 0.0004; Coefficient = 0.02, p-value = 0.0000, respectively). The study concludes that efficient tax management is pivotal in addressing Nigeria’s infrastructure challenges and recommends policies to strengthen VAT allocation, incentivize corporate tax contributions, and channel petroleum tax revenues into infrastructure development. These insights provide relevant implications for fiscal policy and sustainable infrastructure financing in Nigeria.
Keywords
Infrastructure Deficit, Taxation, and Autoregressive Distributed Lag (ARDL) estimation
Downloads
References
1. Adah, A. M. (2021). Effect of tax revenue on infrastructural development in Nigeria. Journal of Government and Applied Economics, 3(2), 45-58. [Google Scholar] [Crossref]
2. Adeleye, A. O., Nwabuzor, E. M., & Oyedokun, G. E. (2024). Tax revenue and.10599405 infrastructural development of health sector in Nigeria. Journal of Economic Research, 4(1), 30-40. https://doi.org/10.5281/zenodo [Google Scholar] [Crossref]
3. Ali, A. & Zouaghi, L. (2022) The effect of Taxation on financial performance: the case of Tunisian companies. 10.21203/rs.3.rs-2359367/v1. [Google Scholar] [Crossref]
4. Aliyu, Abubakar Biliksu and Mustapha, A. A. (2020) Impact of tax revenue on economic growth in Nigeria. Bullion, 44(4), 64-77. [Google Scholar] [Crossref]
5. Atoyebi, O. M. (2023). Analysing the impact of road taxation in Nigeria. Business A.M. 5(2), 112-118. [Google Scholar] [Crossref]
6. Ayo, O (2021). Taxation Revenue And Infrastructural Development In Nigeria (2004-2015). Repository.mouau.edu.ng: [Google Scholar] [Crossref]
7. Bowen, S. B. (1943). The Interpretation of Voting in the Allocation of Economic Resources. Journal of Political Economy, 51(2), 198–211. [Google Scholar] [Crossref]
8. Emughedi, O., Lawal, F. C., and Kalu, E. U., (2024) Impact of Tax-based Revenue on Economic Development in Nigeria, 1999 to 2023. South Asian Journal of Social Studies and Economics, 21 (10). pp. 37-47. ISSN 2581-821X. [Google Scholar] [Crossref]
9. Federal Inland Revenue Service. (2018). Annual report 2017. FIRS. [Google Scholar] [Crossref]
10. Justin Ogbonna, LINUS, and Faith Chidinma, Lawal, and Ebere Ume, Kalu, (2024) Trade Outwardness and International Financial Flows in Nigeria. South Asian Journal of Social Studies and Economics, 21 (10). pp. 26-36. ISSN 2581-821X. [Google Scholar] [Crossref]
11. Kalu, E. U., Okoyeuzu,C., Alio F. C., & Ukpere, W. I., 2018. "Private Sector Lending and Growth of the Real Sectors in a Developing Economy: An Ardl Approach," Journal of Reviews on Global Economics, Lifescience Global, vol. 7, pages 953-961. https://doi.org/10.6000/19297092.2018.07.93 [Google Scholar] [Crossref]
12. Kalu, E. U., Lawal, F. C., Ukpere, W. I., & Anowor, O. F. (2025). Elasticity of Financial System Stability to Growth Shocks and Economic Policy Uncertainty in Sub-Saharan Africa. Veredas Do Direito, 22(6), E224009. Https://Doi.Org/10.18623/Rvd.V22.N6.4009. [Google Scholar] [Crossref]
13. Lawal, Faith Chidinma., Josaphat Uchechukwu Joe Onwumere., Ebere Ume Kalu., Onyejiaku Chinyere., and Wilfred Isioma Ukpere (2024). Responsiveness of the Stability of the Financial System to Fiscal Shocks: ASub-Saharan Africa (SSA) Perspective. Innovations, Number 78 September 2024. www.journalinnovations.com. [Google Scholar] [Crossref]
14. Lawal, F. C., Adejoh, J. A., and Lawal I. L.,(2023). The Relationship Between Tax Formation and Economic Growth in Nigeria and Ghana. Journal of Policy and Development Studies (JPDS). Vol. 13. Issue 4. [Google Scholar] [Crossref]
15. Leung, H. S. (2023). How Can Increased Tax Improve a City’s Development. BCP Business & Management, 43, 65-72. [Google Scholar] [Crossref]
16. Lindahl, E. (1930). Just Taxation - A Positive Solution. Ekonomisk Tidskrift, 397–420. [Google Scholar] [Crossref]
17. Meyer, J. W., & Rowan, B. (1970). Institutionalized Organizations: Formal Structure as Myth and Ceremony. American Journal of Sociology, 83(2), 340–363. [Google Scholar] [Crossref]
18. Ministry of Finance. (2017). Voluntary Assets and Income Declaration Scheme (VAIDS) guidelines. Government of Nigeria. [Google Scholar] [Crossref]
19. Mustapha, L. O., Isiaka, L. O., Adegboye, D., Ajepe, A., & Ngozi, I. B. (2022). Tax Revenue Collections and Health Care Infrastructural Development in Nigeria. Journal of Finance and Accounting, 10(1), 1924. [Google Scholar] [Crossref]
20. Nwankwo, C. (2021). Impact of taxation on infrastructural development in Nigeria. Retrieved from https://repository.mouau.edu.ng/work/view/impact-of-taxation-on-infrastructural-development-innigeria-7-2 [Google Scholar] [Crossref]
21. Onyebuchi, N. (2023). Rural Infrastructure Deficit in Nigeria: Bridging the Gap for Sustainable Development. West African Journal on Sustainable Development (WAJSD), 1(1), 71-78. [Google Scholar] [Crossref]
22. Rath, S. (2021). Cross study on tax gap and infrastructure: lessons from Nigeria. Journal of Economics and Economic Education Research, 22(6), 1-13 [Google Scholar] [Crossref]
23. Wagner, A. (1911). Grundlegung der politischen Ökonomie. Leipzig: C. L. Hirschfeld. [Google Scholar] [Crossref]
24. World Bank. (2019). Nigeria: Building effective, accountable, and inclusive institutions for sustaining development. World Bank. [Google Scholar] [Crossref]