EFFECT OF INDIRECT TAX ON THE ECONOMIC DEVELOPMENT OF NIGERIA 2014 TO 2023

This study investigated the effect of indirect taxation on economic development in Nigeria over the period 2014 to 2023. Anchored in the Ability-to-Pay and Benefit Theories of taxation, the research focuses on three major forms of indirect tax Value Added Tax (VAT), customs and excise duties, and export duties while measuring economic development using the Human Development Index (HDI). An ex post facto research design was adopted, drawing on secondary data from the Central Bank of Nigeria, Federal Inland Revenue Service, National Bureau of Statistics, and the World Bank. The study employed descriptive statistics, Augmented Dickey-Fuller unit root tests, co-integration analysis, and an Error Correction Model to evaluate both short-run and long-run dynamics. The empirical results reveal that VAT exerts a significant negative effect on HDI, customs and excise duties show a weak and statistically insignificant relationship, and export duties have no measurable impact. Inflation and unemployment were also found to significantly depress HDI. Overall, the findings suggest that while indirect taxes remain a crucial source of government revenue, their current structure in Nigeria undermines human development outcomes. The study recommends revising VAT policy to protect essential goods, strengthening tax administration, controlling inflation, expanding employment opportunities, and diversifying the revenue base to enhance the developmental impact of taxation.