EFFECT OF VALUE ADDED TAX ON CONSUMPTION IN NIGERIA (EMPHASIS ON INDIVIDUAL AND HOUSEHOLD SPENDINGS)

Abstract

Abstract
This paper empirically estimates the impact of Value Added Tax (VAT) on consumer consumption
in Nigeria using annual data from 1990 to 2023. In addition to consumption, the variables
captured in the model include VAT, interest rate, inflation rate, Consumer Price Index (CPI), Real
Gross Domestic Product (RGDP), Private Consumption Expenditure (PCE), Per Capital Income
(PCI) and Infrastructure (INFER). We obtained the secondary statistics from the World Bank, the
Central Bank of Nigeria, the Federal Inland Revenue Service, National Bureau of Statistics, and
the Organization for Economic Co-operation and Development (OECD). This paper further
employed Auto Regressive Distributed Lag (ARDL) with the assistance of E-View software
approach in estimating the relationship among the variables. The paper reveals that VAT has a
positive and statistically significant impact on consumer consumption expenditure in Nigeria.
Therefore, this study recommends the needs for government to be reviewing the VAT rate from
time to time in order to serve as a technique for controlling and checkmating the level of
consumption in Nigeria.