The Quality of Institutions and Tax Effectiveness on Nigerian Economy

Adebayo Adedokun^1, and Okorie Ukafor Ukafor¹

¹Department of Economics, Obafemi Awolowo University, Ile-Ife, Nigeria

Cite this paper:
Adebayo Adedokun and Okorie Ukafor Ukafor. The Quality of Institutions and Tax Effectiveness on Nigerian Economy. Journal of Finance and Economics. 2024; 12(3):46-52. doi: 10.12691/jfe-12-3-1

Abstract

The paper investigates the roles of institution in the effectiveness of tax revenue on the economic growth in Nigeria using ARDL to analyse data and employed principal component analyses to generate institutional quality index. The results show there are short-run significance of tax on the economic growth regardless of the level of the quality of institution. However, there are no evidence of joint cointegration among the economic growth, tax revenue and the institutional quality which could be attributed to poor policy coordination to foster synergy. Meanwhile, the long-run individual effects shows strong significant role of institution in a sustainable economic growth, which implies that growth enhancing variables would be ineffective when the institutional quality is poor. Specifically, the threshold analysis revealed that tax and other macroeconomic variables would be ineffective on the economic growth if the institutional index in the country is below 1.92. However, the higher the institutional quality index, the higher the effect of growth enhancing variables on the economic growth.

Keywords:
nigeria economic growth institutional quality tax revenue corruption

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