Tax Revenue and Health Infrastructure Financing in Nigeria

The Nigerian government has been increasingly utilizing various sources of funding for infrastructure development since the return of civilian rule. These sources include Multilateral Development Banks (MDBs), Bilateral Creditors, Public-Private Partnerships (PPPs), and the Tax for Infrastructures Scheme (Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme). However, the country’s infrastructure stock is estimated to be between 20% and 25%, which is significantly below the recommended international benchmark of 70% of gross domestic product. In light of this, the study examined the impact of tax revenue on health infrastructure financing. The study adopted an ex-post facto research design. The study used a secondary data and it is a time series data obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin, Federal Inland Revenue Service (FIRS), and Office of the Accountant General of the Federation (OAGF) using the dataset from 1985 to 2020. Validity and reliability were premised on the statutory of the Nigeria data. Descriptive and inferential method of data analysis were used to analyse the data. The inferential statistics used comprised of unit root test, co-integration test, optimal lag selection, autoregressive distribution lag model, and bound test which are used to test the short run and the long run effect of tax revenue and infrastructure financing. The independent variable, tax revenue is measured using company income tax, value-added tax, petroleum profit tax, capital gain tax, and tertiary education tax, while the dependent variable is measured using health infrastructure financing. The findings showed that tax revenue has a significant effect on health infrastructure financing (Adj. R2 =  0.734; Fstatistic= 5.140, P-value = 0.04). The study, thereby, concluded that tax revenue has significant effect on health infrastructure financing in Nigeria. The study recommended that the government should focus on improving tax collection mechanisms. This could involve strengthening tax administration, enhancing tax compliance, and addressing tax evasion and avoidance. Also, to ensure that tax revenue effectively contributes to health infrastructure financing, policymakers should consider earmarking a specific portion of tax revenue specifically for healthcare projects. This would ensure a dedicated and sustained funding stream for the development and maintenance of healthcare facilities and services.

Keywords: Infrastructure financing, Health infrastructure, Tax revenue, Company income tax, Petroleum profit tax, Value added tax, Education tax, Capital gains tax