THE EFFECTS OF DOMESTIC TAXES ON FOREIGN PRIVATE INVESTMENT IN NIGERIA

ABSTRACT

The enabling environment created through generous fiscal policies is expected to increase the level of foreign private investment in Nigeria beyond the present level. However, on the contrary what is witness are divestments cum capital flight out of the country. It is therefore, in line with the above, that this study seeks to examine the effect of tax incentives on foreign private investment in Nigeria. Therefore, the objectives of the study, was to examine the extent to which tax incentives have impacted on foreign private investment in Nigeria, to examine the impact of tax rate on aggregate foreign private investment in Nigeria and to examine the relationship between tax rate and foreign private investment in Nigeria. The research adopted the ex post facto research designed which utilised secondary data. The study covers the period 1970-2007. The ordinary least square(OLS) regression analyses was adopted in testing the hypotheses where the dependent variable was foreign private investment(FPI) while the independent variable was incentive tax rate(ITR), and Normal Tax rate(NTR). The result as revealed from the tested from the hypotheses was that tax incentives rate in Nigeria does not have a positive significant impact on foreign private investment; Normal tax rate does not have significant impact on foreign private investment and there is no positive relationship between tax rate and foreign private investment in Nigeria. Therefore, in line with the findings, the study recommends that the federal government of Nigeria should seek more avenues to increase foreign private investment in Nigeria like increased infrastructure facilities and creating an enabling environment for foreign private investment in Nigeria.