Tax Incentives and Business Growth: Evidence from Nigeria’s Manufacturing Industry

Abstract

The study examines the impact of tax incentives on business growth in the Nigerian manufacturing industry. Ex post facto research design was utilized where fifty listed manufacturing companies were purposively selected. Data were sourced from the companies’ audited financial statements, Nigerian Exchange Group factbook, and Federal Inland Revenue Service (FIRS). Tax incentive was measured by capital allowance, while business growth was measured by the profitability metric - return on equity (ROE). The control variables of the study were firm growth opportunities, interest rate, and firm size. A panel data analysis using a Fixed Effect Regression Model was employed to analyze the data. The results indicates that capital allowance incentives have a significant positive impact on the ROE of the manufacturing companies. The study concludes that tax incentive scheme plays a crucial role in promoting business growth in Nigeria. Therefore, we recommend that the Federal Government continue to promote the tax incentives for the manufacturing industry to ensure its meaningful contribution to business growth and sustainable development.

Keywords: Tax incentives, business growth, return on equity, manufacturing companies, panel data

DOI: 10.7176/JESD/15-7-06

Publication date: September 30th 2024