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Company Income Tax Policies and Domestic Investment in Nigeria
Ujah, I. P.; Ogbonnaya, V. O.; Okezie, S. O. & Ihendinihu, J. U.
This study investigates the impact of company income tax (CIT) policies on domestic investment (GDI) in Nigeria over a 34-year period (1990-2023), utilizing an ex-post facto design and annual time series data sourced from the Central Bank of Nigeria (CBN), Federal Inland Revenue Service (FIRS), and the World Bank. Both short-run and long-run Autoregressive Distributed Lag (ARDL) models, the study provides a comprehensive empirical analysis of the CIT-GDI nexus. Findings reveal that in the long run, CIT rate, GDP growth, interest rate, exchange rate, and unemployment significantly influence domestic investment, with CIT showing a negative and statistically significant effect on GDI. This highlights the potentially distortionary impact of high corporate taxes on capital formation. In the short run, CIT, inflation, exchange rate fluctuations, and unemployment are also significant drivers of GDI, reflecting the sensitivity of investment to macroeconomic shocks and fiscal policy shifts. The study concludes that while company income tax policies do exert significant influence on investment in Nigeria, their effectiveness is conditional on the broader macroeconomic, institutional, and regulatory environment. Long-term investment inflows are particularly responsive to policy consistency, tax competitiveness, and the stability of supporting economic variables. The study recommends periodic reviews of CIT policies to reflect current economic realities, reduction of tax rates to enhance competitiveness, and improved alignment between tax policy and national investment goals. In addition, the government should complement fiscal reforms with infrastructural development, monetary stability, and regulatory transparency to create a more enabling environment for sustainable investment. These insights provide strategic direction for policymakers seeking to optimize Nigeria’s investment climate and tax revenue generation through evidence-based corporate tax reforms.
Editorial
Published: 31 March 2025
9(1) 89 - 112.
Abstract
Affiliations
Department of Accounting, College of Management Sciences, Michael Okpara University of Agriculture, Umudike, Nigeria1,2,3,4
Ujah, I. P.1; Ogbonnaya, V. O.2; Okezie, S. O.3 & Ihendinihu, J. U.4
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Ujah, I. P.; Ogbonnaya, V. O.; Okezie, S. O. & Ihendinihu, J. U. (2025). Company Income Tax Policies and Domestic Investment in Nigeria. Otuoke Journal of Management Sciences, 9(1) 89 - 112.
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