Taxation and its product, Tax have been very important vehicles for  economic policies of many countries of the world. For a very long time, tax has been a major source of revenue for various levels of governments. For instance, in Nigeria, the laws of the land stipulate the categories of taxes that are collectable by each of the three tiers of government. This is with a view to enhancing basic economic growth and development at all levels of government. However, the use to which taxes are put is a major concern to the majority of Nigerians.

This paper examines the major taxes accruing to various governments in Nigeria as reported by the Federal Inland Revenue Service (FIRS).  The study adopted the use of secondary data as the major data collection method. Thus, the author relies on data obtained from the Federal Inland Revenue Service report for the analysis of the various revenues accruing to Nigeria. Also, various books, journals and government publications were used extensively for the analysis. Reported opinions of Nigerians on the application of these revenues for developmental activities were also reviewed.  The analysis  of the taxes collected from 1995 to 2004 suggests that government has not really lived up to its responsibilities in terms of the provision of basic social amenities and other infrastructures necessary for the growth and development of a nation. The study therefore, suggests some recommendations, which if accepted and embraced could enhance a better economic growth and development in Nigeria. 



Responsible governments all over the world, be it at the Federal, State or Local government level, are concerned with the provision of social goods and services for their citizens.

They are responsible for the maintenance of laws and orders within their nations and also for the protection of their territorial integrity against any external aggression.

In carrying out these social responsibilities, a huge amount of money is needed. One of the major sources of fund available to government to execute its numerous programs is imposition of taxes.

Governments at various levels enact laws to impose taxes and to enforce their payment so that enough revenue can be generated to defray their expenditure.

However, despite many stringent penalties and fines in the tax laws, it appears that a lot of individuals and corporate entities still do not see the reason why they should pay correct taxes or pay taxes at all. Hence, they try in some cases to avoid payment of taxes and in

other extreme cases, evade taxes (Bukar, 2004; Omoigui, 2004).

In the light of the above, it is necessary to examine the Nigerian Tax System vis-à-vis the use that the revenues generated from taxes in Nigeria are being put.

The paper is divided into six major parts, namely: the introduction (as given above); conceptual framework; specific uses of tax as a stimulus for growth and development; analysis of data; criticisms of government’s handling of tax revenue; summary, conclusions and recommendations


Payment of tax is as old as man, dating back to the days of Jesus Christ were He paid his tax, advised his disciples and people at that time to see payment of tax as an obligation which they must fulfill. Right from that time still date, tax has always been one of the obligations of the workforce of any country.

Tax is a compulsory payment made by income earners, goods and services, property, etc imposed by the government to take care of the basic needs of the citizenry(Anyanwu, 1997).

Nigeria is one of the countries striving to be one of the leading economies of the world by 2020; which is why the government is trying to provide basic infrastructure in other to help the standard of living of its citizens. Provision of these basic amenities will enhance development of the country and so the government resorted to a way of raising funds to meet these demands through the compulsory payment of tax by income earners in the country; corporate organizations, on goods and services (Fagbemi et al, 2010). Chigbu (2012) asserted in one of his works that the economic history of both developed and developing countries is tied to taxation, even as it is a great source of revenue for the government, controls the production and consumption of certain goods and services. He added other reasons for which taxes are imposed to include protection of Small and medium enterprises (SMEs), positively control inflation, avoid income inequalities, control business and commerce; all these culminating in economic growth. A vibrant tax system that protects SMEs in a country is solid bedrock for creating entrepreneurs which will contribute immensely to the sustainable development of a country.

However, an assessment of Nigeria’s total revenue over the years prove that the revenue gotten from crude oil is about 75%, while the remaining 25% is from other sectors of which tax is inclusive. A clear example is revenue from crude oil in 2006 which was at88.7% and the non-oil share of 12.4%.In 2009,79.8% while the non-oil sector accounted for just 22.3% of the total revenue (CBN, 2010). The above data is a clear prove that Nigerians do not perform their obligation of paying their tax.

Thus, it is pertinent to highlight that a sound tax system is a yardstick for economic development of any country. It plays a lot of roles to include: increase in governments’ savings, increase in resources available, provision of infrastructure, etc (Musgrave and Musgrave, 2006).

Moreover, if tax incentives are actively monitored closely to ensure that individuals and corporate bodies remit their taxes as and when due, alongside that the taxes gotten are evenly distributed to meet the needs of the citizenry, then economy of Nigeria will be at its peakAkintoye and Tasie (2013). This invariably means that for tax to be used in the economic development of the country, both the government and the citizens have a role to play. Therefore, the government needs to map out the right plans to achieve this, as well as the citizens need to portray willingness to pay their taxes.

The priority of any economy is to ensure its GDP is increasing, rather than reducing as this shows the economic growth of a nation, therefore remitting of tax by is one way of sustaining a country’s GDP.

In addition, tax in Nigeria is divided into the following categories to increase GDP; there are: Value Added Tax (VAT), Personal Income Tax (PIT), Company Income Tax (CIT) and Petroleum Profit Tax (PPT). The Petroleum Profit Tax (PPT) is a type of tax paid by petroleum companies in Nigeria, while Personal Income Tax (PIT) is a tax paid by an individual based on his incomeand Company Income Tax (CIT) is tax paid by companies (in Nigeria from1996 it has been 30%).

Conclusively, Nigeria is the most populous country in Africa with probably the highest economy in Africa, yet 110 million Nigerians live in abject poverty. Year in year out, Nigerian roads are degrading badly, education facilities lacking, high rate of unemployment, unstable power supply, environmental degradation, unstable water supply, etc and the list continues. These are a few of the problems ravaging the economy of Nigeria, how can these problems be well managed or eliminated. This study is aimed at examining tax as a stimulus for growth and development from these problems.


Many Nigerians refuse or are discourage to pay their taxes because they have not seen the roles of tax payment being implemented in the country. A survey into the streets of Nigeria will generate a common response from about 70% of Nigerians on why they do not pay their tax. About 70% of Nigerians will owe their indebtedness to paying of tax to the fact that the government pockets such funds rather than using it for infrastructural development. 

On the part of the tax administration, their challenges include: corrupt tax officials, ignorance of the citizens on the benefits of tax, tax avoidance, high rate of tax, poor method of tax collection, unaccountability on the part of tax officials, etc.

In addition, job administrators are unable to discharge their duties effectively because of inadequate fund, lack of equipment like computers, printers, scanners, photocopying machine, papers, stamps, etc and untrained personnel; all these affect the smooth running of the activities of tax administrators.

However, another problem of this study is poor manner of approach of tax administrators to the members of the public. Most tax administrators rudely approach members of public, sometimes it could end in a fight and this has the tendency of discouraging the members of the public from paying their tax. 

Coupled with the fact that in Nigeria there is a problem of poor statistics of tax, tax in Nigeria are not well accounted for. Many states in Nigeria do not have an accurate data base for their tax system and this singular problem has added to why Nigerian citizens are discouraged to pay for what cannot be accounted for.

These are some of the problems that affect tax as a stimulus for growth and development in Nigeria.


The major objective of this study is to examine tax as a stimulus for growth and development in Nigeria.

Other specific objectives include:

a) To determine the significant relationship between tax and the economic development of Nigeria.

b) To identify the challenges of tax as a stimulus for growth and development in Nigeria.

c) To examine if a sound tax system in Nigeria can encourage the establishments of SMEs (entrepreneurship). 

d) To identify ways of improving taxation in Nigeria. 


The following research questions are generated to guide this study:

a) Is tax a stimulus for growth and development in Nigeria?

b) Is there a significant relationship between tax and the economic development of Nigeria?

c) What are the challenges of tax as a stimulus for growth and development in Nigeria?

d) Can a sound tax system in Nigeria encourage establishments of SMEs (entrepreneurship)?

e) What are the ways of improving taxation in Nigeria?


H0: Tax is not a stimulus for growth and development in Nigeria.

H1: Tax is a stimulus for growth and development in Nigeria.


This study is important to the general public, government, tax administrators and policy makers.

Firstly, this study is purely meant to inform, educate, enlighten and sensitize the general public on tax, the benefits of tax and what is expected of them; as it is widely noted that most Nigerians shy away from their responsibility of paying tax. This study aims at encouraging individuals and corporate bodies to pay their taxes as and when due.

Secondly, this study aims at reminding the government that funds received from tax should be pumped into the economy; those infrastructures that are in dilapidated states should be revived.

Thirdly, this study is to bring to the knowledge of tax administrators that they contribute to why Nigerians are discouraged to pay tax. As some of them exhibit corrupt practices and have the wrong manner of approach when they confront individuals.

Finally, this study is suppose to encourage policy makers to enact policies that will encourage taxation in Nigeria.

This study will be of immense benefit to other researchers who intend to know more on this topic and can also be used by non-researchers to build more on their work. This study contributes to knowledge and could serve as a guide for other work or study.


This study is restricted to tax as a stimulus or growth and development in Nigeria.

Limitations of study

1. Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

2. Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.


⦁ TAX:This isa compulsory contribution to state revenue, levied by the government on workers' income and business profits, or added to the cost of some goods, services, and transactions.

⦁ STIMULUS:Is a thing or event that evokes a specific functional reaction in an organ or tissue.

⦁ GROWTH:This is the process of increasing in size.

⦁ DEVELOPMENT:This is the act or process of growing or causing something to grow or become larger or more advanced.

⦁ GDP (GROSS DOMESTIC PRODUCT): Is the monetary value of all the finished goods and services produced within a country's borders in a specific time period. Though GDP is usually calculated on an annual basis, it can be calculated on a quarterly basis as well.

⦁ PERSONAL INCOME TAX (PIT): PIT is a direct tax levied on income of a person. A person means an individual, an ordinary partnership, a non-juristic body of person and an undivided estate.

⦁ COMPANY OR CORPORATE INCOME TAX:An assessment levied by a government on the profits of a company. The rate of corporate income tax paid by a business varies between countries, although since corporations are legal entities distinct from their owners and operators, they are typically taxed as if they were people.

⦁ PETROLEUM PROFIT TAX:Is a major source of revenue for the Federal Government of Nigeria to meet its statutory obligations of ensuring the economic development of Nigeria.


Anyanwu, J. C.(1997), Nigeria Public Finance, Joance Education Publishers, Onitsha .

Fagbemi. T. O. M. Uadiale and A. O. Noah (2010) “The Ethics of Tax Evasion: Perceptual Evidence from Nigeria”, European 

Journal of Social Sciences, Volume 17, Number 3.

Chigbu. E.E, Akujuobi L. E.,Appah E(2012). “An Empirical 

Study on the Causality Between Economic Growth And Taxation in Nigeria”. Current Research Journal of Economic Theory 4(2), pg 29-38.

CentralBank of Nigeria (2010): Statistical Bulletin. Abuja, Nigeria.

Musgrave, R. A., Musgrave, P. B. (1994), Public Finance in Theory and Practice, Tata Oates, W. C. (1972), Fiscal Federalism, Harcourt Brace, Jovanuricts New York.

Akintoye, I.R.,Tashie, G.A (2013):The Effect of Tax Compliance on Economic Growthand Development in Nigeria, 

West-Africa;British Journal of Arts and Social SciencesVol.11 

No.II (2013).



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