Tax policy and foreign direct investment (FDI) in Nigeria
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Date
2015
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Publisher
Kampala International University(KIU)
Abstract
The study investigated the influence of tax incentives, tax rate on the foreign direct
investment in the period 1984-2014. The model is derived from eclectic paradigm
theory. It can be understood from this theory the main factors that driven FDI inflows
have been the need to receive market access, the opportunities presented by large scale
privatization process and the degree of political and economic stability. The researcher
utilized secondary data of 30 years. Data points and data have been taken from
UNICTAD Annual reports World Bank development reports, central bank of Nigeria
CBN publication on monetary policy. CBN Annual Report and statement of account
and federal ministry of finance reports. The trend of each of the above mentioned
construct variables have also been examined in the study to show their movement and
changes between (the independent variable) tax policy and foreign direct investment
(dependent variable) in Nigeria. The researcher used Pearson Linear Correlation
Coefficient (PLCC) and ordinary lenst square (OLS) regression analysis. To examine
the trend of the research variables line graphs have been employed. The study findings
showed the trend of tax incentive in Nigeria in the study period were fluctuations fiĀ·om
time to time. Tax incentives in million of Naira has experienced a decreasing and
increasing trend. In summary form tax incentive from 1984-1986 was declining then
from 1987-1993 ,,vere a general rising trend of tax incentive in Nigeria. Fluctuations
from time as that of tax incenti\'es. [n summary form the FDI intlov, of Nigeria has
experienced an increased trends in some shorter year for instance 1992 the FDI inflmv
raised to 42, 624from 111, 730 in 1991.
The research concluded the tax policy as presented by tax incentives and tax rate ,vhich
were the main focus of this study. Based on the research finding the researcher
concluded the tax policy presented by tax incentive and tax rate have positive
significant effect on FDI ini10\v in Nigeria. The researcher also recommenclecl based on
the empirical quantitative analysis that tnx rate has a significant and negative impact on
FDI inflow accordingly. lowering tax rate accompanied by tax procedure simplification
,vill increase FDI inflow and a tax incentive policy showed be planned and managed
appropriately.
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Keywords
Tax Policy, Tax Policy, Nigeria, Nigeria, Foreign Direct Investment, Foreign Direct Investment