Consumption Tax and Economic Growth in Nigeria

This study investigated the relationship between consumption tax —specifically Value Added Tax (VAT) and Electronic Money Transfer Levy (EMTL)—and economic growth in Nigeria from 2009 to 2024. The primary aim is to assess how these taxes influence Gross Domestic Product (GDP) and Per Capita Income (PCI). Employing a positivist research approach, the study utilises a causal-comparative design, analysing time series data sourced from the Central Bank of Nigeria and the Federal Inland Revenue Service. The findings reveal a weak negative correlation between VAT and GDP (r = -0.085), indicating that VAT changes do not significantly impact economic growth in Nigeria, as only 0.72% of the variance in GDP is explained by VAT fluctuations. These results underscore the limited effectiveness of VAT in stimulating economic growth and enhancing individual income levels in Nigeria. The study emphasises the need for comprehensive economic reforms that address structural challenges, such as infrastructure deficits, inadequate investment levels, and regulatory inefficiencies. Policymakers are urged to consider broader fiscal strategies beyond mere tax measures to achieve meaningful improvements in economic performance and income distribution. Ultimately, the findings contribute significantly to the existing literature on tax policy and economic growth in developing countries. They highlight the necessity for a multi-faceted approach to fiscal policy in Nigeria, integrating various strategies that can effectively stimulate growth and improve the living standards of the population.