EQUITY FDI AND FEDERALLY COLLECTED TAX REVENUE IMPACTS ON ECONOMIC GROWTH IN NIGERIA

Abstract

This study examines short-run and long-run impacts of equity foreign direct investment and federally collected tax revenue on economic growth, based on quarterly time series data of 2011q1 to 2021q4. Structural break, and lag order selection criteria was determined before performing unit root test. Pesaran/Smith/Shin bounds test criteria suggested ARDL (1,1,1,1,1,0) lag structure for analyzing study’s model. Data exploration tested include autocorrelation, heteroskedasticity, normality, Ramsey regression specification-error test for omitted variables, and CUSUMSQ for parameter constancy, they showed the models are well fitted. The study found that long-run cointegration existed among the study’s variables, and there is a speed of adjustment to shock of 109.63%. About 60.75% variation in economic growth was explained by the explanatory and control variables. In the long run, the coefficient of equity foreign direct investment and federally collected tax revenue have significant positive impact on economic growth. In the short-run, first differences of equity foreign direct investment and federally collected tax revenue impacted significantly and negatively on economic growth. There is Granger causality between gross domestic product and federally collected tax revenue

Keywords: Foreign Capital, Equity Foreign Direct Investment, Federally Collected Tax Revenue, Economic Growth, ARDL Bounds Test, Structural Break.