Abstract

The paper investigates foreign direct investment, corruption and tax revenue productivity in Nigeria. The main objective of this study is to examine the extent to which foreign direct investment and corruption have influenced tax revenue productivity in Nigeria during the period under study. The study utilized aggregate annual data from 1980 to 2019. The data was analyzed with the co-integration/VECM method. The major findings are: the test for stationary using Augmented Dickey Fuller (ADF) showed that all the variables were not stationary in levels but were stationary in first difference. The Johansen-Juselius co-integration techniques were employed in testing for long run equilibrium relationship among the variables and the results indicated that co-integrating relationship was found among the variables. The coefficient of determination reveals that about 63% of the systematic variation in the dependent variable (TRV) is explained by the four independent variables which are foreign direct investment, corruption, broad money, government expenditure, trade openness and share of agricultural sector. Also, the vector error correction model (VECM) shows that about 27% of the discrepancy between the actual and the long run equilibrium value in tax revenue is corrected or eliminated each year. Furthermore, the result revealed that foreign direct investment has negative and significant effect on TRV in Nigeria, corruption and government expenditure has positive and insignificant impact on TRV, broad money and share of agriculture has a negative and insignificant effect on TRV, while trade openness has a positive and significant impact on TRV in Nigeria based on the magnitude and the level of significance of the coefficient and p-value. The paper concluded that there is need to encourage domestic investment and likewise tackle the issue of corruption in tax revenue generation. This can only be achieved if the government to help local firms to increase their absorptive capacity and benefit from the positive technological spill-overs that are induced by foreign direct investment enterprises in Nigeria. In addition, make corruption a high- risk and low- gain, as opposed to a low-risk and high-gain endeavour.