Progressive Taxation And Inclusive Growth In Nigeria: An Econometric Approach

Nigeria's experience highlights a persistent struggle to translate economic growth into inclusive growth, with debates about the role of taxation generating various interpretations in academic literature. The link between progressive taxation and inclusive growth remains underexplored in Nigeria. This study investigated the effect of progressive tax on inclusive growth, using secondary annual data from 1991 to 2023. Data on Gross Domestic Product per employed person, tax progressivity, and government expenditure on education were obtained from the Federal Inland Revenue Service and World Bank’s World Development Indicators, while the political stability index was sourced from the International Country Risk Group. The analysis was conducted using the Autoregressive Distributed Lag (ARDL) method, with inferences made at a 5% significance level. Results indicate a stable long run cointegration relationship; oil tax progressivity and government education expenditure significantly promote inclusive growth, whereas political instability significantly hinders it. In the short run, non-oil tax progressivity, education expenditure, and political instability have significant impacts on inclusive growth, while oil tax progressivity does not. This study recommends strengthening the progressivity of non-oil taxes by improving tax administration and increasing investment in education to enhance productivity and equity