Evaluating the Effectiveness of Tax Reforms on Revenue Generation in Nigeria: A Time-Series Analysis (1999–2023).

Abstract:

This study evaluates the effectiveness of tax reforms on revenue mobilization in Nigeria over the period 1999–2023. Using annual revenue data from the Federal Inland Revenue Service (FIRS), the analysis integrates multiple econometric approaches, including structural break tests, unit root diagnostics, an error correction model (ECM), and ARIMA forecasting. The findings reveal significant structural breaks in 2004, 2011, and 2014, which correspond to major reform episodes and external shocks, indicating that policy changes have had measurable impacts on revenue performance. Stationarity tests confirmed that revenue is integrated of order one, justifying the use of ECM to capture both shortrun dynamics and long-run equilibrium relationships. The ECM results highlight a significant and negative error correction term, suggesting that deviations from the long-run path are corrected over time, thereby strengthening the resilience of Nigeria’s fiscal system. Forecast results project sustained revenue growth, with collections expected to surpass ₦15 trillion by 2026, assuming no major disruptions. Collectively, these results provide robust evidence that tax reforms have enhanced Nigeria’s revenue mobilization capacity, though the system remains sensitive to external shocks, particularly oil price fluctuations. The study underscores the importance of sustaining reforms and diversifying the revenue base to ensure long-term fiscal stability.