Tax Revenue and Economic Growth in Ebonyi State: An Econometric Analysis

The contribution of tax revenue to economic growth in sub-national contexts such as Ebonyi State has received limited empirical attention, despite the critical role of state-level fiscal resources in financing public goods and infrastructure that underpin economic activity. This study examined the relationship between tax revenue and economic growth in Ebonyi State, using data spanning from 2010 to 2023. The study was grounded in the endogenous growth theory, which recognizes public investment financed by tax revenue as a driver of long-run economic growth. An ex-post facto research design was adopted. Secondary data on internally generated revenue components, federal statutory allocations, and state gross domestic product proxies were sourced from the Ebonyi State Internal Revenue Service, the Central Bank of Nigeria, and the National Bureau of Statistics. Data were analyzed using autoregressive distributed lag (ARDL) bounds cointegration tests and error correction modeling. Findings showed a positive and statistically significant long-run relationship between total tax revenue and economic growth, with personal income tax and company income tax sharing contributing the most to the growth relationship. The short-run dynamics, however, were weaker and less consistent. The study concluded that tax revenue is a significant long-run driver of economic growth in Ebonyi State. It was recommended that the state government should widen the tax base by formalizing the informal sector and strengthening revenue collection capacity through digital tax administration infrastructure.

Keywords: Tax revenue, economic growth, Ebonyi State, endogenous growth theory, ARDL