TAX INCENTIVES AND FOREIGN DIRECT INVESTMENT IN NIGERIA

ABSTRACT

This study examined the relationship between tax incentive and foreign direct investment in Nigeria. The ex-post facto research design was adopted in this study. Data were collected from Central Bank of Nigeria statistical bulletin and the annual report of Federal Inland Revenue Service, and the data were analysed by Ordinary Least Square as a statistical tool; using the error correction model due to the volatility of the data used. From the analysis, it was found that deduction from research and development was has a negative impact on foreign direct investment as revealed by the negative coefficient value. Oil exploration relief was found to have a positive effect on foreign direct investment, relief from import duties was found to have a negative impact on foreign direct investment as showed by the negative coefficient value, and tax holiday was found to have a positive effect on foreign direct investment. It was therefore recommended that, Nigerian government should expand its tax base to ensure that more companies are enlisted into the tax window. The Nigerian government can further embark on diversifying the economy so has to improve productivity which in turn will attract foreign direct investment and also government should create the enabling environment, both economic, socially and politically that engender the inflow of FDI into the country.