The Effect of Foreign Direct Investment on Government Revenue in Nigeria

This study investigates the effect of foreign direct investment inflows on government revenue generation in Nigeria for the period 2013 to 2023. Foreign direct investment is widely regarded as a catalyst for economic development, contributing to capital formation, technology transfer, and employment. However, its direct contribution to government tax revenue through corporate income taxes, withholding taxes, and customs duties has not been adequately quantified in the Nigerian context. This study relies on secondary time series data sourced from the Central Bank of Nigeria Statistical Bulletin, the National Bureau of Statistics, and the Federal Inland Revenue Service. FDI inflow data are correlated with total tax revenue, company income tax receipts, and non-oil revenue figures using Granger causality tests and ordinary least squares regression. Results indicate that FDI inflows have a positive and statistically significant short-run effect on company income tax revenues but a weaker long-run relationship, partly due to generous tax holiday incentives extended to foreign investors under the Investment and Securities Act. The study concludes that while FDI contributes positively to government revenue, the fiscal cost of incentives may offset short-term gains. It recommends a policy review of tax holiday provisions to ensure that foreign investment benefits are balanced with adequate revenue contributions to the Nigerian public purse.

Keywords: foreign direct investment, government revenue, company income tax, Nigeria, tax incentives.