Taxation, exchange rate and foreign direct investment in Nigeria
-
DOIhttp://dx.doi.org/10.21511/bbs.14(3).2019.07
-
Article InfoVolume 14 2019, Issue #3, pp. 76-85
- Cited by
- 1211 Views
-
194 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
This paper investigates factors that may impact foreign direct investment in Nigeria. It seeks to establish the role of taxation (corporate tax) for foreign direct investment in Nigeria. Annual time series data derived from the Central Bank of Nigeria statistical bulletin and the United Nations Conference on Trade and Development covering a period of 31 years (1985–2015) were used for this study. The variables considered in the study include FDI, corporate tax, exchange rate, inflation rate, real gross domestic product (RGDP). They were analyzed using Ordinary Least Squares (OLS), Johansen Co-Integration model and Unit Root Test. Findings from this research observed that a negative relationship exists between corporate taxation and FDI. Also, the study observed that corporate tax have a significant impact on FDI and there exists a long-run relationship between the two variables.
- Keywords
-
JEL Classification (Paper profile tab)G32, G38, M48
-
References28
-
Tables8
-
Figures0
-
- Table 1. Unit root test
- Table 2. Breusch-Godfrey serial correlation LM test
- Table 3. Heteroskedasticity test: Breusch-Pagan-Godfrey
- Table 4. Unrestricted cointegration rank test (trace)
- Table 5. Unrestricted cointegration rank test (maximum eigenvalue)
- Table 6. Normalized co-integrating coefficient (standard error in parentheses)
- Table 7. Ordinary least square regression analysis
- Table A1. Components of net capital flow by origin
-
- Agbaeze, E. K., Udeh, S. N., & Onwuka, I. O. (2015). Resolving Nigeria’s Dependency on Oil – The Derivation Model. Journal of African Studies and Development, 7(1), 1-14.
- Anyafor, M. O. (1996). Public Finance in a Developing Economy: the Nigerian Case. Enugu: National Library of Nigeria.
- Anyanwu, J. C. (1998). An econometric investigation of determinants of foreign direct investment in Nigeria. Proceedings of the Nigerian Economic Society Conference (pp. 219-240).
- Aykut, D., & Ratha, D. (2003). South-South FDI flows: how big are they? Transnational Corporations, 13(1), 149-176.
- Beck, S., & Chaves, A. (2012). The impacts of various taxes on foreign direct investment (Working Paper). University of Delaware, Department of Economics.
- Darthmouth Business Journal. (2012). Foreign direct investment in Nigeria.
- De Mooij, R., & Ederveen, S. (2008). Corporate Tax Elasticities: A Reader’s Guide to Empirical Findings. Oxford Review of Economic Policy, 24(4), 680-697.
- Desai, M. A., Foley, C. F., & Hines Jr., J. R. (2004). Foreign Direct Investment in a World of Multiple Taxes. Journal of Public Economics, 88(12), 2727-2744.
- Egger, P., & Radulescu, D. M. (May, 2008). Labour Taxation and Foreign Direct Investment (CESifo Working Paper No. 2309).
- Ekpung, E. G., & Wilfred, O. W. (2014). The Impact of Taxation on Investment and Economic Development in Nigeria. Academic Journal of Interdisciplinary Studies, 3(4), 209-318.
- Kumar, N. (1995). Changing Character of Foreign Direct Investment From Developing Countries: Case Studies from Asia (Discussion Paper No. 9516). United Nations University, Institute for New Technologies.
- Lall, S. et al. (1983). The New Multinationals: The Spread of Third World Enterprises. Chicester: John Wiley.
- Mokuolu, J. (2018). Effect of exchange rate and interest rate on Foreign Direct Investment and its relationship with economic growth in Nigeria. European Journal of Economic and Financial Research, 3(1), 33-47.
- OECD. (2006). Trends and Recent Developments in Foreign Direct Investment. International Investment Perspectives: 2006 Edition.
- OECD. (2007). Tax Incentives for Investment – A Global Perspective: experiences in MENA and non-MENA countries (Draft). MENA-OCED Investment programme.
- Omankhanlen, A. (2011). Effect of exchange rate and inflation on Foreign Direct Investment and its relationship with economic growth in Nigeria. Economic and Applied Informatics, 17(1), 5-16.
- Page, S. (1998). South-North Investment by Developing Countries in the EC: A sign of the Emergence of New Investors. In B. G. Hickman, & L. Klein (Eds.), Link Proceedings 1991, 1992 (pp. 210-230). Studies in Applied International Economics.
- Saidu, A. S. (2015). Corporate Taxation and Foreign Direct Investment in Nigeria. European Journal of Accounting, Auditing and Finance Research, 3(8), 17-24.
- Shylajan, C. S. (2011). FDI and its determinants in India. The India Economy Review, 8, 162-169.
- Tolulope, I., Uwuigbe, U., Uwuigbe, O. R., Emmanuel, O., Oriabie, S., & Asiriuwa, O. (2018). The Effect of Corporate Governance Attributes on Earnings Management: A Study of Listed Companies in Nigeria. Academy of Strategic Management Journal, 17(6), 1-13.
- Tosun, M. S., & Abizadeh, S. (2005). Economic growth and tax components: An analysis of tax change in OECD. Applied Economics, 37, 2251-2263.
- Ugochukwu, U., Amah, O., & Onoh, J. O. (2013). The Impact of Foreign Direct Investment on the Nigerian Economy. European Journal of Business and Management, 5(2), 25-33.
- UNCTAD. (2004). World Investment Report 2004: the Shift Towards Services. Geneva: UNCTAD.
- UNCTAD. (2009). Trade and development report, 2002. New York and Geneva: United Nations.
- Uwuigbe, U., Eluyela, D. F., Uwuigbe, O. R., Obarakpo, T., & Falola, I. (2018). Corporate governance and quality of financial statements: a study of listed Nigerian banks. Banks and Bank Systems, 13(3), 12-23.
- Uwuigbe, U., Uwuigbe, O. R., & Francis, I. (2013). Environmental Tax as a Tool for Flood Reduction in Nigeria: A study of Lagos state Creating Global Competitive Economies: 2020 Vision Planning and Implementation. Proceedings of the 22nd International Business Information Management Association Conference. IBIMA 2013, 3, 2211-2221.
- Wheeler, D., & Mody, A. (1992). International Investment Location Decisions: The Case of U.S. firms. Journal of International Economics, 33(1-2), 57-76.
- Young, K. H. (1988). The effects of taxes and rates of return on foreign direct investment in the United States. National Tax Journal, 41(1), 109-121.