Effect of Tax Incentives on Foreign Direct Investment in Nigeria

ABSTRACT

This study investigates the effect of tax incentives on foreign direct investment (FDI) in Nigeria from 1995 to 2022. Secondary data was obtained from the Central Bank of Nigeria, Nigeria Export Processing Zones Authority (NEPZA), and other relevant government agencies. The Autoregressive Distributed Lag (ARDL) regression method was used for the analysis. The study's findings indicate that cost-based tax incentives have a positive and significant effect on FDI in Nigeria in both the short run and the long run. Conversely, profit-based tax incentives do not significantly impact FDI in Nigeria in either the short run or the long run. Consequently, it is recommended that the government engage with stakeholders, including foreign investors, industry associations, and international organizations, to gather feedback and insights on improving the effectiveness of tax incentives in promoting FDI in Nigeria.