Industrial Development and Federal Tax Revenue in Nigeria: An ARDL Bounds Testing Approach

Over the years, the Nigerian industrial sector has declined considerably in both productivity and contribution to economic growth in the country. Empirical studies suggest that both tax revenue and industrial development have positive impact on economic growth. This study examined the relationship between tax revenue and industrial development in Nigeria. The study covered the period of 1981 to 2015. Industrial gross domestic product was used as the dependent Variable and Custom and excise duty tax, petroleum profit tax as independent variable. The Autoregressive Distributive Lag (ARDL) model was used in order to determine the long run relationship amongst the variables utilized in this study. Results revealed that tax revenue has a positive effect on industrial development. Also, the F-statistic is greater than the upper bound value which means that there is a long run relationship amongst variables. This therefore concludes that revenue from tax will be very useful in developing the Industrial sector through improvement in technology in order to increase productivity. The study thus recommended that that the government should ensure that the tax system is free from corruption and actual revenue obtained from tax should be declared and channeled to the right sector.