FOREIGN DIRECT INVESTMENT, CORRUPTION AND TAX REVENUE PERFORMANCE IN NIGERIA AND SOUTH AFRICA

ABSTRACT

The Nigerian economy has been unstable with its revenue dwindling over the years as a result of the heavy dependence on crude oil revenue, which is also impacted by external shocks. As such, there has been a shift in the focus from oil revenue to non-oil revenue (taxation). Foreign Direct Investment (FDI) is seen as a major catalyst that can aid the developing countries in improving their Gross Domestic Product (GDP), stemming from the high inflow of capital from overseas, technology transfers, skills, job creation as well as opportunities which will ultimately boost tax revenue of the developing country. This study seeks to investigate the impact of FDI on Tax Revenue Performance (TRP) with the moderating effect that corruption plays on their nexus, in Nigeria and South Africa.

Secondary time series data, covering a period of 27 years from 1994 to 2021 was used for the study. The data was sourced from World Bank Global Development Index, United Nations Development Programme, the Nigeria’s National Bureau of Statistics (NBS). The Statistics South Africa (StatsSA), and the yearly statistical bulletin of the Central Bank of Nigeria (CBN). The study adopted the Error Correction Model (ECM) and the panel least square techniques for data analysis.The findings revealed that FDI in the Agricultural and Services Sectors had significant and negative relationship with Tax Revenue Performance in Nigeria. However, only the Natural Resources and Services Sectors showed a significant negative relationship while the Agricultural Sector revealed a positive insignificant relationship between FDI and TRP in South Africa.