Impact of Taxation on Manufacturing Sector Output in Nigeria

This study explores the impact of taxation on manufacturing sector output in Nigeria from 1994 to 2023, using the Autoregressive Distributed Lag (ARDL) bounds testing approach to uncover both short-run and long-run dynamics. Drawing on secondary data from the Central Bank of Nigeria, National Bureau of Statistics, and the Federal Inland Revenue Service, the analysis focuses on direct and indirect impact of taxation on manufacturing sector output using four key tax types: Petroleum Profit Tax (PPT), Company Income Tax (CIT), Value Added Tax (VAT), and Personal Income Tax (PIT). Anchored in the Laffer curve theorem which suggests a non-linear relationship between tax rates and economic performance, the study examines whether Nigeria’s tax policies have supported or hindered manufacturing sector’s growth. The findings reveal that PPT significantly boosts manufacturing output in both the short and long run, highlighting the developmental value of resource-based revenues. CIT shows a positive influence in the short run but turns negative and statistically insignificant in the long run, suggesting that prolonged high corporate taxes may discourage industrial growth. VAT and PIT, although showing some long-run influence, were not statistically significant. Based on these insights, the study recommends a rebalancing of tax policy especially optimizing petroleum profit tax utilization, reform corporate tax structure to reduce burdens, reassess the design and administration of value added tax and balancing personal income tax rates to safeguard demand and productivity. By blending empirical evidence with theoretical insight, this research adds to the fiscal policy discourse in developing economies and offers a valuable framework for rethinking Nigeria’s tax strategy in support of sustainable industrial development.

Petroleum Profit Tax, Company Income Tax, Value Added Tax

1. Adefeso, H. A., & Adelowo, O. (2018). Value added tax and economic growth: Manufacturing sector output in Nigeria (2000–2017). Journal of Economics and Sustainable Development, 9(12), 112–120. [Google Scholar] [Crossref]

2. Adereti, S. A., Adesina, J. A., & Sanni, M. R. (2019). Value added tax and economic growth in Nigeria: A long-run analysis. Journal of Economics and Policy Analysis, 14(1), 56–72. [Google Scholar] [Crossref]

3. Adereti, S. A., Sanni, M. R., & Adesina, J. A. (2011). Value added tax and economic growth of Nigeria. European Journal of Humanities and Social Sciences, 10(1), 456–471. [Google Scholar] [Crossref]

4. Akintoye, I. R., Adegbie, F. F., & Onyeka-Iheme, C. V. (2020). Tax planning strategies and profitability of quoted manufacturing companies in Nigeria. Journal of Finance and Accounting, 8(3), 148–157 [Google Scholar] [Crossref]

5. Akintoye, I. R., (2020). Tax planning strategies and profitability of quoted manufacturing companies in Nigeria. International Journal of Finance and Accounting, 9(3), 89–97. [Google Scholar] [Crossref]

6. Aziegbe, F. I. (2022). Taxation and household consumption in Nigeria: An ARDL approach. International Journal of Development Studies, 4(1), 77–88. [Google Scholar] [Crossref]

7. Central Bank of Nigeria. (2020). Statistical bulletin. https://www.cbn.gov.ng/document [Google Scholar] [Crossref]

8. Central Bank of Nigeria. (2025). Statistical bulletin. https://www.cbn.gov.ng/document [Google Scholar] [Crossref]

9. Eniekezimene, A. F., Wodu, E., & Anda-Owei, J. P. (2024). Selected taxes and manufacturing sector output in Nigeria. African Journal of Economics and Financial Management, 5(1), 68–80. [Google Scholar] [Crossref]

10. Ewubare, D. B., & Ozo-Esan, I. P. (2019). Effect of taxation on manufacturing sector output in Nigeria (1980–2017). International Journal of Economic and Financial Management, 4(4). [Google Scholar] [Crossref]

11. FIRS tax evasion report. (2024). Https://guardian.ng/business-services/nigeria-loses-15-billion-annuallyto-tax-evasion-says-firs/? [Google Scholar] [Crossref]

12. Francis, E. (2024). Selected taxes and manufacturing sector output in Nigeria. African Journal of Economics and Financial Management, 9(2), 55–68. [Google Scholar] [Crossref]

13. Ilemona, S. A., Nwite, S., & Oyedokun, G. E. (2019). Effects of multiple taxation on the growth of small and medium enterprises in Nigeria. Journal of Taxation and Economic Development, 18(2), 1–8. Academia.edu [Google Scholar] [Crossref]

14. Imoughele, L. E., & Okoro, G. E. (2022). Fiscal policy, institutional quality and the quest for growth of manufacturing sector in Nigeria. International Journal of Current Research in the Humanities, 25(1). [Google Scholar] [Crossref]

15. Korgbeelo, C. (2023). Taxation and manufacturing sector output development: Evidence from Nigeria. [Google Scholar] [Crossref]

16. International Journal of Academic Research in Economics and Management Sciences, 12(3), 45–60. [Google Scholar] [Crossref]

17. Laffer, A. B. (2004). The Laffer curve: Past, present, and future. The Heritage Foundation. [Google Scholar] [Crossref]

18. National Bureau of Statistics. (2025). National Bureau of Statistics. https://nigeriastat.gov.ng/ [Google Scholar] [Crossref]

19. Ogudu, A. E., Ordu, M. A., & Nwosu, L. C. (2018). Exchange rate, tax burden and manufacturing sector performance in Nigeria (1990–2017). International Journal of Economics and Financial Issues, 8(6), 133– 140. [Google Scholar] [Crossref]

20. Ogundipe, M. (2022). The impact of manufacturing sector on economic growth in Nigeria. Journal of Economic Studies. https://doi.org/10.21203/rs.3.rs-2203096/v1 [Google Scholar] [Crossref]

21. Oguejiofor, U. H., & Ogudu, A. E. (2024). The dynamics of fiscal policy measures on manufacturing sector growth: Evidence from Nigerian economy. International Journal of Research in Social Sciences, 14(1), 88–102. [Google Scholar] [Crossref]

22. Ogungbadejo, H. K., Abdul-Rahmon, K. B., & Ayinde, T. O. (2021). Tax revenue and economic development in Nigeria: A disaggregated analysis. Journal of Economics and Policy Analysis, 11(2), 33– 48. [Google Scholar] [Crossref]

23. Oladipo, O. A., & Olayemi, A. A. (2020). Company income tax and the performance of the manufacturing sector in Nigeria. Nigerian Journal of Taxation and Economic Development, 19(1), 56–70. [Google Scholar] [Crossref]

24. Olawunmi, D., & Oyedele, T. (2018). Taxation structure and manufacturing sector output in Nigeria: An econometric analysis (1990–2017). African Journal of Economic Policy, 25(2), 103–120. [Google Scholar] [Crossref]

25. Olawunmi, D., Damilola, O., & Ajayi, M. (2019). Taxation and economic growth nexus in Nigeria: A reexamination of the evidence. Journal of Accounting and Taxation, 11(5), 80–89. [Google Scholar] [Crossref]

26. Okafor, R. G. (2015). Tax revenue generation and Nigeria economic development. European Journal of Business and Management, 4(19), 49–51. [Google Scholar] [Crossref]

27. Okeke, K. E., & Appah, E. (2018). Taxation and the performance of the manufacturing sector in Nigeria: An empirical analysis. International Journal of Economic Theory, 4(2), 29–38. [Google Scholar] [Crossref]

28. Onoh, A., Ezema, I. C., & Eneh, S. C. (2018.). Impact of value added tax on manufacturing sector performance of Nigeria. International Journal of Science, Engineering and Technological Development, 11. Article ISSN 2250-9046. [Google Scholar] [Crossref]

29. Otekunrin, A. O. (2023). Impact of oil and non-oil tax revenue on manufacturing sector output in Nigeria. International Journal of Energy Economics and Policy, 13(1), 123–130 [Google Scholar] [Crossref]

30. Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326. https://doi.org/10.1002/jae.616 [Google Scholar] [Crossref]

• Impact of Foreign Direct Investment in India
• Issues Involved in Digitalisation Special Reference to Indian Tourism Growth
• Relationship Marketing and Customer Loyalty in the Fast-Moving Consumer Goods (FMCG) Industry in Nairobi County
• Financial Literacy or Financial Inclusion? Which is Which, What is What—To Achieve Uganda’s 10-Fold Economic Growth By 2040
• Harnessing Natural Gas for Economic Transformation: Overcoming the Regulatory and Infrastructural Bottlenecks in Nigeria