EVALUATING THE PRODUCTIVITY EFFECTS OF VALUE-ADDED TAX IN NIGERIA’S MANUFACTURING SECTOR: EVIDENCE FROM ARDL MODELING
Jamilu Ibrahim Magaji and Muhammad Rilwanu Umar
Volume 12 Issue 3
Abstract
This study empirically examines the impact of Value-Added Tax (VAT) on productivity within Nigeria’s manufacturing sector over the period 1981–2023. Utilizing annual time series data sourced from the Central Bank of Nigeria Statistical Bulletin and the World Development Indicators (2023 edition), the analysis employs the Autoregressive Distributed Lag (ARDL) model to accommodate the mixed order of integration identified through the Augmented Dickey-Fuller (ADF) unit root test. Results reveal that VAT and broad money supply exert statistically significant and positive effects on manufacturing output in both the short and long run, indicating their roles as stimulants of sectoral productivity. Conversely, interest rate and exchange rate are found to have persistent negative effects, suggesting their constraining influence on manufacturing performance. These findings underscore the need for targeted fiscal strategies that enhance the efficiency of VAT utilization, recommending that VAT revenues be strategically invested in industrial infrastructure and productivity-enhancing interventions to strengthen the resilience and output of Nigeria’s manufacturing sector. Keywords: ARDL Modeling, Manufacturing Sector, Productivity, Value-Added-Tax.
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