Economic and Financial Review


Central Bank of Nigeria


Taxation, Nigeria


The article employs the conventional model of tax effort to appraise Nigeria’s tax performance in comparison to other counties of the West African Monetary Zone (WAMZ). The key objective of the study is to determine whether Nigeria is limited it its revenue collections by a low capacity to generate tax revenue by non-commitment-towards using the available tax capacity to fund public services. If the country has the capacity to increase tax revenue, what are the appropriate channels through which tax revenue can be increased. Empirical evidence suggests that Nigeria is not making the optimal of her taxable capacity as the country's potential for higher tax revenue exceeds actual tax collection, and its effort is least along the WAMZ countries in raising tax revenue. The article concludes that the country is not constrained in its revenue collections by a low capacity to generate tax revenue and could, in the event of a budgetary imbalance, choose to raise extra revenue rather than rationing expenditure when key sectors of the economy are yearning for greater financing. The findings further reveal that income and profit taxes are the most appropriate channels through which Nigeria can improve tax performance given the low index of tax effort the country is making in these areas. The willingness to evade taxes is also found to be associated with taxpayers’ zeal to operate in the shadow economy. The major, contribution of the study, therefore, lies in its ability to provide empirical support in identifying the right channels through which Nigeria can improve tax revenue. The study recommends the implementation of deliberate policies aimed at reducing the scope of the underground economy to curtail tax evasion, broaden the income tax base and enhance tax collection. The outcomes also divulge further possibilities for non-distortionary tax increase under indirect taxation.

Author Bio

Peter D. Golit is a staff of the Research Department of the Central Bank of Nigeria.

Publication Title

CBN Economic and Financial Review





Recommended Citation

Golit, P. D. (2008). Appraising Nigeria's tax effort: a comparative econometric analysis. CBN Economic and Financial Review, 46(1), 69-103.

Included in

Economics Commons



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