HUMAN DEVELOPMENT INDEX AND TAX REVENUE IN NIGERIA: A REVISED ANALYSIS

Abstract

This research examines the impact of tax revenues on human development in Nigeria, focusing on Company Income Tax (CIT), Personal Income Tax (PIT) and Value Added Tax (VAT). The study is motivated by persistent fiscal challenges, including overdependence on oil receipts, weak tax administration, low tax compliance, and inefficient public expenditure. Annual data from 2005 to 2024 were obtained from the Central Bank of Nigeria, National Bureau of Statistics, and the International Monetary Fund. The Autoregressive Distributed Lag (ARDL) bounds testing approach was employed to analyse the relationship between tax revenue, economic growth and human development. Government expenditure and inflation were included as control variables.
The results reveal that tax revenue significantly explains economic growth, accounting for 80.6% of the variation in GDP (F= 11.694, p < 0.001). However, tax revenue has no significant effect on the Human Development Index (HDI), explaining only 13% of its variation (F = 1.385, p = 0.302). CIT and PIT exhibit positive but insignificant effects on HDI, while VAT is negatively associated with human development.  The study concludes that Improving tax administration, broadening the tax base to include the informal sector, reforming the VAT system, and prioritizing public investment in health, education, and infrastructure are essential for translating tax revenue into improved human development outcomes in Nigeria.