Functional Specification of the Moderation Model Incorporating Public Investment and Tax Revenue Interaction Terms
Abstrak
Nigeria faces persistent challenges in mobilizing tax revenue to stimulate sustainable economic growth, raising questions about the role of public investment in enhancing or offsetting the effects of taxes. The study employs an ARDL framework to examine the moderating role of public investment on the relationship between selected tax revenues (corporate income tax and VAT) and Nigeria’s economic growth. Both short-run and long-run dynamics are modeled, with the error correction term capturing convergence toward long-run equilibrium. Interactive terms (LOGPUIV*CITR and LOGPUIV*VATR) reflect whether public investment enhances or offsets tax revenue effects. Positive coefficients denote complementarity, while negative values indicate substitution, highlighting efficiency in tax revenue utilization and public investment management. The study analyzed 30 years (1994–2023) of Nigerian time-series data on tax revenues, investment, and economic output. Descriptive statistics showed that average corporate income tax (CITR) was ₦784.94 billion, VAT revenue ₦711.63 billion, private investment ₦9,001.31 billion, public investment ₦1.63 billion, and real GDP ₦3.45 × 10¹¹, while labor force participation averaged 59.8%. Unit root tests indicated mixed integration orders, justifying ARDL modeling. Long-run ARDL results revealed that CITR (0.4472) and public investment (0.0896) positively affected output, VAT had a negative effect (–0.00003), while the interaction of public investment with CITR (–0.2412) reduced output, and with VAT (0.0612) increased it. The short-run ECM indicated a 26.1% speed of adjustment. Public investment positively moderates the impact of value-added tax but negatively interacts with corporate income tax. These results highlight the importance of strategic public investment in maximizing the growth potential of tax revenues and guiding economic policy for Nigeria’s sustainable development.
Referensi
Adebayo, A. & Olugbenga, O. (2020). Public investment and tax revenue: the moderating role in Nigeria’s economic growth. Journal of African Development Studies, 15(2), 223-247.
Adelakun, O. A., & Ogunleye, O. M. (2021). The role of public investment in modulating the impact of tax revenue on Nigeria’s economic growth.African Economic Review, 17(2), 115-134.
Adeleke, A., Adegboye, A., & Olaniyan, O. (2020).The moderating effect of private investment on the impact of taxation on Nigeria’s economic growth.Global Economics Review, 2020.
Adeyemi, S., & Oni, M. (2022). The impact of tax revenue on economic growth: the moderating role of private investment in Nigeria. Journal of Economic Development Studies, 2022.
Ahmad, E. (2015). Governance and institutions: the role of multilevel fiscal institutions in generating sustainable and inclusive growth. In Handbook of multilevel finance (pp. 200-230). Edward Elgar Publishing.
Ahmed, R., & Ogunleye, A. (2021). Impact of tax revenue and public investment on economic growth in Nigeria: a moderating role. African Journal of Economics and Finance, 13(2), 88-105.
Akanwa, A.O., Iko-ojo, I.V., Ezeomedo, I.C., Ikegbunam, F.I., Igwe, P.U., Muoghalu, L.N., Okeke, S.O., Okonkwo, A.U., Odimegwu, C.N., Nkwocha, K.F. and Arah, V.C., 2024. Effects of climatic risks on soil Erosion/desertification in southern and northern Nigeria using GIS/remote sensing analysis. In Climate crisis: Adaptive approaches and sustainability (pp. 151-170). Cham: Springer Nature Switzerland.
Akintoye, A. & Babajide, T. (2023).Public investment as a catalyst for tax revenue and economic growth in Nigeria.International Journal of Public Finance, 20(3), 113-136.
Akpan, U., Effiong, E., & Akintoye, R. (2020). Impact of tax revenue on economic growth: evidence from Nigeria. Journal of Economic Policy Studies, 12(2), 45-67.
Aliyu, A. & Mustapha, M. (2020).[Full bibliographic details not provided in the project document—please insert journal title, volume (issue), and page numbers]
Amri, K., Nazamuddin, B. S., & Aimon, H. (2023). Does tax effort moderate the effect of government expenditure on regional economic growth? A dynamic panel data evidence from Indonesia. Ekonomika, 102(2), 6-27.
Angelov, A., & Nikolova, V. (2025). Causality Between the Tax Burden of Direct Taxes and Economic Growth in European Union Countries with Proportional Taxation. Journal of Risk and Financial Management, 18(11), 626.
Anyanwu, J. C. (2019). Public capital expenditure and economic growth in Nigeria: Evidence from the ARDL approach. Nigerian Journal of Economic and Social Studies, 61(2), 129–150.
Bello, I. A., & Nwoye, O. (2020).Public investment as a moderator in the tax revenue-growth nexus in Nigeria.Journal of Economic Studies, 28(3), 45-64.
Chukwuemeka, E. & Uchenna, I. (2021).Public investment and the nexus between tax revenue and economic growth in Nigeria.African Economic Policy Review, 10(1), 35-56.
Edewusi, D. G. & Ajayi, I. E. (2019).The nexus between tax revenue and economic growth in Nigeria.International Journal of Applied Economics, Finance and Accounting, 4(2), 45–55.
Emughedi, O. G. H. U., Chidinma, F., & Kalu, E. U. (2024). Impact of tax-based revenue on economic development in Nigeria, 1999 to 2023. South Asian Journal of Social Studies and Economics, 21(10), 37-47.
Etim, O. E., Nsima, J. U., Austin, U. N., Samuel, S. C., & Anselem, M. U. (2021). Comparative analysis of the effect of direct and indirect taxation revenue on the economic growth of Nigeria. Account and Financial Management Journal, 6(7), 2403– 2418. https://doi.org/10.47191/afmj/v6i7.05
Etoama, P. E., Akani, F. N., & Ogbonna, G. N. (2023). Tax revenue and economic development in Nigeria.GPH-International Journal of Business Management, 6(08), 83-104.
Eze, K., & Nwafor, I. (2023).The interaction between taxation, private investment, and economic growth in Nigeria.Journal of Economic Dynamics, 20(2), 34-56.
Eze, P., & Chigozie, I. (2019).The moderating effect of private investment on tax revenue and economic growth in Nigeria.International Journal of Economics and Finance, 2019.
Ezekiel, P. O., & Ifeanyi, N. (2023).The impact of public investment on the relationship between tax revenue and economic growth in Nigeria.Nigerian Journal of Economics, 45(2), 78-96.
Hira, A., Swartz, T., & Cao, J. (2026). Taxes, Growth, and Equity: The Illusions of Fiscal Policy. International Journal of Financial Studies, 14(2), 30.
Ibrahim, A., & Suleiman, M. (2021).Tax revenue, private investment, and economic performance in Nigeria.African Journal of Economic Research, 15(1), 101-120.
Ijeoma, C., & Nwankwo, U. (2020). Tax revenue and public investment: moderating the effect on Nigeria’s economic growth. Nigerian Journal of Economic Development, 25(3), 150-165.
Ikechukwu, U. F., & Odimegwu, C. N. (2021). Implications of COVID–19 outbreak on the construction and property development sector in the South-East Nigeria. Journal of Scientific Research and Reports, 27(2), 1-9.
International Monetary Fund. Fiscal Affairs Dept. (2020). Fiscal Monitor, April 2020: Policies to Support People During the COVID-19 Pandemic. International Monetary Fund.
Johnson, F., & Adebisi, M. (2022).The role of public investment in the tax revenue-growth relationship in Nigeria.Journal of Development Economics, 32(4), 482-500.
Korter, G.O., Lawal, P.O., Korter, K.O., Adeoye, A.O., Ojo, O.D., Adewoye, K.B., Korter, R.O. and Jemilohun, V.G., 2025. From Windfalls to Equilibrium: Modeling Nigeria’s GDP Growth with Autoregressive Distributed Lag (ARDL) Bounds Testing (1990–2023). ABUAD International Journal of Natural and Applied Sciences, 5(2), pp.149-161.
Nwosu, S. N., Ejinkonye, R. C., Obasi, A. I., & Iregha, M. A. (2023). Effect of taxation on economic growth in Nigeria. Journal of Global Accounting, 9(4), 275-288.
Obi, H. K., & Ekwunife Ebele, N. (2024). Value added tax revenue and economic growth of Nigeria. Journal of Interdisciplinary Research in Accounting and Finance, 11(3), 1-15.
Odimegwu, C. N., & Igwe, C. (2020). Adequate tax policy and implementation: a panacea to the success of a property tax system. A case of the failed Anambra State property and Land Use Charge (APLUC). Tropical Built Environment Journal, 7(1).
Odimegwu, C., & Anyakora, M. (2018). A comparative analysis of land use charge laws in Anambra, Edo, Lagos and Enugu states, Nigeria. coou African Journal of Environmental Research, 1(2), 14-24.
Odimegwu, C., & Anyakora, M. (2023). Land value capture through land based taxation: For sustainable infrastructure finance in Anambra State, Nigeria. coou African Journal of Environmental Research, 4(1), 121-138.
Odimegwu, C., and Odumodu, A (2020). Tax assessment and revenue performance: A case of failed Anambra State property and land use charge. COOU African Journal of Environmental Research, 2(1), 167–186.
Oguejiofor, C. S., & Onyiorah, B. O. (2021). Extent of utilization of internet technologies by teachers of business subjects in senior secondary schools in Ogidi Educational Zone of Anambra State. Multidisciplinary Journal of Vocational Education & Research, 4(1), 79–87.
Oguejiofor, C. S., & Onyiorah, B. O. (2023). Family background as a predictor of students’ interest in business education programme in tertiary institutions in South East, Nigeria. Multidisciplinary Journal of Vocational Education & Research, 5(1), 244–262.
Oguejiofor, C. S., Nzeribe, P. U., & Onyiorah, B. O. (2022). Entrepreneurship education for employability and global competitiveness in the new normal. COOU Journal of Educational Research, 7(1), 233–240.
Ogunleye, A., & Olowu, S. (2021). Private investment as a moderator of taxation and economic growth in Nigeria.African Journal of Business and Economic Studies, 2021.
Ojo, A., & Usman, A. (2023).Private investment as a moderator between tax revenue and economic growth: evidence from Nigeria. Nigerian Economic Review, 2023.
Okonkwo, A. N., & Chika, E. (2021). Public investment and tax revenue: implications for economic growth in Nigeria. Journal of African Development, 23(4), 302-318.
Okoro, F. A., Onyiorah, B. O., & Emeasoba, N. C. (2025). Business educators’ perception of search engine and email marketing skills required for self-employment by business education students in South-South, Nigeria. International Journal of Business and Entrepreneurship Education, 2(2), 90–100.
Okoye, E., & Ajao, O. (2022).The role of public investment in moderating the impact of tax revenue on economic growth in Nigeria.Journal of Economic Policy and Development, 36(4), 104-120.
Oladimeji, T., Adeola, O., & Ojo, S. (2019). Private sector investment and fiscal policy in Nigeria: A dynamic approach. International Journal of Development Studies, 7(3), 87-103
Oladipo, A. O., & Ebohon, O. (2022).Moderating effects of public investment on tax revenue-economic growth dynamics in Nigeria.African Development Review, 34(1), 23-41.
Oluwaseun, B., & Adetola, F. (2022). Tax policy reforms and economic growth in Nigeria: The role of private investment. Nigerian Journal of Fiscal Policy, 18(4), 155-173.
Onyiorah, B. O. (2021). Innovative strategies for enhancing the teaching and learning of business education. Global Journal of Education, Humanities and Management Sciences (GOJEHMS), 3(1), 60–71.
Onyiorah, B. O. (2022). Distant learning program in business education: An effective alternative to the traditional classroom in the COVID-19 era. IOSR Journal of Business and Management (IOSR-JBM), 24(4, Ser. III), 13–19
Onyiorah, B. O. (2023). Influence of business educators’ professional development on instructional delivery of business education courses in universities in Anambra State. Journal of Educational Research, 8(1), 273–290
Oramah, C. P., Ngwu, T. A., & Odimegwu, C. N. (2025). Addressing the impact of complex English use in communicating climate change in Nigerian communities through contextual understanding. Climate, 13(3), 56.
Oto, T. E., & Wayas, S. (2024). Value added tax and economic growth of Nigeria (2003-2022). FUDMA Journal of Accounting and Finance Research [FUJAFR], 2(1), 16-30.
Paparas, D., Richter, C., & Paparas, A. (2015). Fiscal policy and economic growth, empirical evidence in European Union. Turkish economic review, 2(4), 239-268.
Pesaran, H. H., & Shin, Y. (1998). Generalized impulse response analysis in linear multivariate models. Economics letters, 58(1), 17-29.
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of applied econometrics, 16(3), 289-326.
Sairmaly, F. A. (2023). Human capital development and economic growth: A literature review on information technology investment, education, skills, and productive labour. Jurnal Minfo Polgan, 12(1), 679-693.
Sekianti, A., & Nuraini, F. (2025). Tax revenue and economic growth in developing countries: A narrative synthesis of empirical evidence. Sinergi International Journal of Economics, 3(1), 58-69.
TweneboahSenzu, E. (2019). The empirical evidence of corporate tax impact on private investment in developing countries using Ghana as a case study.
Open Access
IDEA (International Development of Economics and Administration Journal) is a national peer reviewed and open access journal that publishes significant and important research from all area of Development of Economics and Administration.
This journal provides immediate open access to its content that making research publish in this journal freely available to the public that supports a greater exchange of knowledge.
Copyright
Submission of a manuscript implies that the submitted work has not been published before (except as part of a thesis or report, or abstract); that it is not under consideration for publication elsewhere; that its publication has been approved by all co-authors. If and when the manuscript is accepted for publication, the author(s) still hold the copyright and retain publishing rights without restrictions. Authors or others are allowed to multiply article as long as not for commercial purposes. For the new invention, authors are suggested to manage its patent before published. The license type is CC-BY-SA 4.0.
Disclaimer
No responsibility is assumed by publisher and co-publishers, nor by the editors for any injury and/or damage to persons or property as a result of any actual or alleged libelous statements, infringement of intellectual property or privacy rights, or products liability, whether resulting from negligence or otherwise, or from any use or operation of any ideas, instructions, procedures, products or methods contained in the material therein.
