Summary of Findings
This research work evaluates the impact of taxation on foreign direct investment in Nigeria. Taxation was captured by Company Income Tax and Value Added Tax (VAT). The statistical techniques employed, surfaced the following results;
(ii) The entire regression plane is statistically significant. This means that the joint influence of the explanatory variables (CIT and VAT) on the dependent variable (FDI) is statistically significant;
(iii) The computed coefficient of multiple determination (R2 = 0.945401) shows that 94.54% of the total variations in the dependent variable (FDI) is accounted for, by the variation in the explanatory variables namely Company Income Tax (CIT) and Value Added Tax (VAT).
(iv) The total variation of 5.46% of the total variation in the dependent variable is attributable to the influence of other factors not included in the regression model.
(v) There is inconclusive evidence regarding the presence or absence of positive first-order serial correlation (autocorrelation) in the model.
CONCLUSION
FDI is one of the most important strategies for the promotion of economic growth and development in Nigeria. FDI can serve as an engine of growth by increasing the opportunity for their integration into global financial and capital flows, expand employment and exports base, generate technological capability-building and efficiency spillovers to local firms, as well as establish investment arrangements that increase the potential of host countries for economic growth.
However, taxation is another factor which can promote FDI in a country. Thus, the primary function of a tax system is to raise revenue for the government for its public expenditure. So the first goal in the development strategy as regards taxation policy is to ensure that this function is discharged adequately.
· To reduce inequalities through a policy of redistribution of income and wealth. Higher rates of income taxes, capital transfer taxes and wealth taxes are some means adopted for achieving these ends.
· To ensure economic goals through the ability of the taxation system to influence the allocation of resources.
RECOMMENDATIONS
In the light of the research findings, the following recommendations are presented;
· To ensure increased foreign investment inflow into the economy and to reinforce the gains of the economic policy measures, the Nigerian investment promotion decree should be promulgated and repealed.
· Government should adopt tax policies that will not endanger the activities of foreign investors in the Nigeria.
· A taxation system must be as simple as possible with a few taxes and uncomplicated legislation.
· Having seen that taxation exert influence on FDI, foreign Investment should be boosted through conscious provision of necessary tax management framework that will lower the costs of doing business in Nigeria.
· To increase the level of savings and capital formation in the economy, the government should enhance foreign investment activities.
· There is every need for government to protect local industries from foreign competition through the use of import duties, turnover taxes/VAT and excises. This has the effect of transferring a certain amount of demand from imported goods to domestically produced goods.
APPENDIX I
DATA FOR ANALYSIS
YEAR |
FDI ( |
CIT ( |
VAT ( |
1994 |
22229 |
201911 |
7260.8 |
1995 |
75941 |
459987 |
20761 |
1996 |
111295 |
523597 |
31000 |
1997 |
110453 |
582811 |
34000 |
1998 |
80750 |
463609 |
36900 |
1999 |
92793 |
949188 |
47100 |
2000 |
115952 |
1906.2 |
58500 |
2001 |
132481 |
2231.6 |
91800 |
2002 |
225225 |
1731.8 |
108600 |
2003 |
258389 |
2575.1 |
136400 |
2004 |
248225 |
3920.5 |
159500 |
2005 |
302753 |
5547.5 |
178100 |
2006 |
573835 |
5965.1 |
221600 |
2007 |
627024 |
5715.6 |
230800 |
2008 |
693841 |
6246.7 |
241800 |
2009 |
718356 |
7091.2 |
265700 |
2010 |
750728 |
7283.7 |
301400 |
SOURCE: CBN STATISTICAL BULLETIN, VOLUME 21, 2010
APPENDIX II
REGRESSION RESULTS
Dependent Variable: FDI |
||||
Method: Least Squares |
||||
Date: 05/09/12 Time: 11:27 |
||||
Sample: 1994 2010 |
||||
Included observations: 17 |
||||
Variable |
Coefficient |
Std. Error |
t-Statistic |
Prob. |
C |
-78795.31 |
42664.51 |
-1.846859 |
0.0860 |
CIT |
0.117191 |
0.074748 |
1.567819 |
0.1392 |
VAT |
2.809989 |
0.225322 |
12.47100 |
0.0000 |
R-squared |
0.942079 |
Mean dependent var |
302368.8 |
|
Adjusted R-squared |
0.933804 |
S.D. dependent var |
259443.2 |
|
S.E. of regression |
66750.94 |
Akaike info criterion |
25.21411 |
|
Sum squared resid |
6.24E+10 |
Schwarz criterion |
25.36115 |
Log likelihood |
-211.3199 |
F-statistic |
113.8537 |
Durbin-Watson stat |
1.013422 |
Prob(F-statistic) |
0.000000 |
Dependent Variable: LOG(FDI) |
||||
Method: Least Squares |
||||
Date: 05/09/12 Time: 11:28 |
||||
Sample: 1994 2010 |
||||
Included observations: 17 |
||||
Variable |
Coefficient |
Std. Error |
t-Statistic |
Prob. |
C |
-0.204244 |
1.288253 |
-0.158544 |
0.8763 |
LOG(CIT) |
0.074878 |
0.038189 |
1.960696 |
0.0701 |
LOG(VAT) |
1.027958 |
0.086348 |
11.90487 |
0.0000 |
R-squared |
0.945401 |
Mean dependent var |
12.21022 |
|
Adjusted R-squared |
0.937601 |
S.D. dependent var |
0.999560 |
|
S.E. of regression |
0.249689 |
Akaike info criterion |
0.221581 |
|
Sum squared resid |
0.872822 |
Schwarz criterion |
0.368619 |
|
Log likelihood |
1.116559 |
F-statistic |
121.2065 |
|
Durbin-Watson stat |
1.062085 |
Prob(F-statistic) |
0.000000 |
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