The Impact of Trade Openness on Trade and Tax Revenues in Nigeria (1981-2018)
Asian Journal of Economics, Business and Accounting,
The challenge to provide enough resources to fund infrastructure development has been the bane of most developing countries like Nigeria. The appropriate economic and trade policies to deploy to increase revenue generating capacity of the government become compelling. This study examined the impact of trade openness on trade and tax revenue in Nigeria between 1981 and 2018. The study employed Augmented Dickey Fuller and Phillip Peron tests to conduct the stationarity tests. Akaike Information Criterion and Final Predictor Error provided the best lag lengths. Johansen cointegration test was used to determine the long run relationship. The study employed Vector Error Correction Model for the regression analysis while T- test and F test were also done to confirm the statistical significance of the variables and the models. For autocorrelation problem, Breusch-Godfrey serial correlation LM test were conducted and other post- estimation tests were also used. The result of the study showed that trade openness was negatively related with total tax revenue and with trade tax revenue (CED). The results indicate that a unit increase in trade openness leads to 11.58% decrease in trade revenue from CED and 13.69% decrease in total revenue. Trade openness as a policy to increase tax revenue was not beneficial to the country. Trade openness should be adopted with manufacturing and productive sector orientation in mind. In addition, tariff rates should be reviewed, and the tax structure should be transparent, and judicious use of tax resources should be implemented by government.
- Tax Revenue
- trade openness
- custom and excise duty (CED)
- real GDP
How to Cite
Ekesiobi CS, Ifebi OE, Ibekilo BC, Onochie JD. Dynamics of foreign trade and trade relations problems: Policy, options for Nigeria. African Research Review. 2011;5(1):40-56.
Suliman KM. The impact of trade liberalization on revenue mobilization and stability in Sudan. International Research Project on macroeconomic policy challenges of Low-Income Countries. organized by GDN. 2005;654-712.
Bastiaens I, Rudra N. Trade liberalization and the challenges of revenue mobilization: Can international financial institutions make a difference? Review of International Political Economy. 2016;24(2).
International Monetary Fund. Total tax revenue as a percentage of GDP. IMF Revenue Data; 2011.
Genschel P, Seelkopf L. Taxation trends outside the OECD. Review of International Political Economy; 2016.
Rodrik D. How should structural adjustment programme be designed? Harvard University, Canbridge Massachusetts; 1990.
Accessed 30th, April 2020.
Khattry B, Rao JM. Fiscal faux pas? An analysis of revenue implications of trade liberalization. World Development. 2002; 30:1431-1444.
Egwakhe JA, Akinlabi HA, Odunsi K.. Trade openness and tax revenue performance in Nigeria (1987-2016), International Journal of Academic Research in Business and Social Sciences. 2018;8(12):1161-1174.
Fontagne L, Laborde D, Mitaritonna C. An impact study of the economic partnership agreements in the six ACP regions. Journal of African Economics. 2010;20(2): 179-216.
Agyei NK, Amankwaah E. Trade tax revenue and trade openness in Ghana. Journal of Emerging Trends in Economics and Management Sciences (JETEMS). 2018;9(6):344-349.
Asogwa FO, Manasseh CO. The impact of foreign direct investment on economic growth in Nigeria. Journal of Economics and Finance. 2014;3(5):37-45.
Smith A. An Enquiry into the nature of causes of wealth of the Nation. Gulbenklam, Lisbon; 1776.
Ricardo D. The Principle of Political Economy and Taxation; 1817.
Gupta SD. Comparative advantage and competitive advantage: An economics perspective and a synthesis. Athens Journal of Business and Economics; 2015.
Accessed 23rd April 2020.
Laffer AB. The Laffer curve past, present and future. Executive summary background notes No. 1705. The Heritage Foundation. 2004;1765.
Leitao NC. Foreign direct investment: The Canadian experience. International Journal of Economics and Finance. 2010;2(4).
Karman HW, Bano S, Haider N, Mustaq A, Mustafa K. Trade openness and economic growth: A study from developed states. International Journal of Economics, Commerce and Management. 2016;4(3): 180-189.
Asghar F, Mehmood B. Effects of trade liberalization on tax revenue in Pakistan: An empirical scrutiny using ARDL bound testing. Pakistan Economic and Social Review. 2017;55(1):159-184.
Swank D. The new political economy of taxation in the developing world. Review of International Political Economy. 2016;23(2):234-243.
Keen M. Taxation and development again, IMF Working Paper 12/220, 2012;1-30.
Keho Y. The impact of trade openness on economic growth; The case of Cote d’Ivoire. Cogent Open Access. 2017;31:1-14.
Fenira M. Trade openness and growth in developing countries: An analysis of the relationship after comparing trade indicators. Asian Economic and Financial Review. 2015;5(3):468-482.
Onakoya AB, Olotu A, Solomon JT, Ibukun AO. Tax revenue performance, trade liberalization and macroeconomic variables in Sub-Saharan Africa. International Review of Management and Research. 2017;6(2):845-865.
Zarra-Nezhad M, Ansair MS, Moradi M. Determinants of tax revenue: Does liberalization boost or decline it? Journal of Economic Co-operation and Development. 2016;37(2):103-126.
Odunsi KO, Egwakhe JA, Akinlabi HB. Macroeconomic dynamics and tax revenue performance in Nigeria (1987-2016) International Journal of Research Science and Management; 2018.
Nwosa PI, Saibu MO, Fakunle OO. The effect of trade Liberalization on trade tax revenue in Nigeria, African Economic and Business Review. 2012;10(2).
Ter-Minassian T. Dealing with the Revenue Consequences of Trade Reform. International Monetary Fund. 2005;76-102.
Singh T. Trade openness and economic growth in Canada: An evidence from Time Series Tests. Global Economy Journal. 2015;15(3):361-407.
Liew VK. Which lag length should we employ? Economics Bulletin. 2004;3(33):9-19.
Adam CS, Bevan DL, Chambas G. Exchange rate regimes and revenue performance in Sub-Sahara Africa, mimeo, CERDI, Universite d’Aurergne, Clermont-Ferrand. 2011;234-311.
Babatunde OA, Ibukun AO, Oyeyemi OG. Taxation revenue and economic growth in Africa, Journal of Accounting and Taxation. 2017;9(2):11-22.
Moyo C, Kolisi N, Khobai H. The relationship between trade openness and economic growth: The case of Ghana and Nigeria. MPRA Paper. 2017;81317.
Abstract View: 20 times
PDF Download: 12 times