A REVIEW ON NIGERIA’S TAX REFORMS AND IMPACT ON INVESTMENT AND ECONOMIC PRODUCTIVITY OF LISTED MANUFACTURING FIRMS (2015–2025)

Background to the Study Tax policy serves as a fundamental instrument for economic governance, especially in emerging economies where public revenue mobilization is essential for national development. Tax reforms have therefore been integral to successive governments’ strategies to promote investment, reduce fiscal leakages, and improve economic productivity. Tax reforms are a global economic instrument adopted by both developed and developing countries to stimulate investment, enhance compliance, and support fiscal sustainability. For instance, in the United States, the Tax Cuts and Jobs Act (TCJA) of 2017 significantly reduced the corporate income tax rate from 35% to 21%, aiming to spur domestic investment and repatriation of offshore earnings (Gale, Gelfond & Krupkin, 2019). In the United Kingdom, the Making Tax Digital (MTD) initiative launched in 2019 focused on modernizing tax administration through mandatory digital record-keeping and online submissions, thereby improving transparency and compliance (HM Revenue & Customs, 2020). Among developing nations, India’s Goods and Services Tax (GST) reform of 2017 consolidated multiple indirect taxes into a single unified tax system to eliminate cascading taxes and streamline the business environment (Rao, 2018). Similarly, South Africa’s 2018 VAT increase from 14% to 15% was a fiscal response to growing public expenditure pressures and aimed at enhancing revenue generation (OECD, 2019). These reforms underscore the diverse approaches countries adopt based on their economic contexts, yet they share a common objective of creating a more efficient and investment-friendly tax regime. Since the launch of the National Tax Policy (NTP) in 2012 and the subsequent review in 2017, Nigeria has intensified reforms aimed at broadening the tax base, enhancing compliance, and eliminating distortions in the system (Federal Ministry of Finance, 2017). These reforms took on greater urgency amid falling oil revenues, with a key emphasis on non-oil revenue generation and economic diversification through the manufacturing sector (Odusola, 2021). The manufacturing sector is critical to Nigeria’s industrialization agenda. It is positioned to drive employment, increase value-added exports, and reduce dependence on imports. Prior to 2015, the tax system was characterized by multiplicity of taxes, administrative inefficiencies, and policy inconsistencies which deterred long-term investment (Asaolu, Dopemu & Monday, 2020). The introduction of several tax reforms—such as the Finance Act of 2019, 2020, and 2021, changes in VAT structure, pioneer status incentives, and automation of tax administration—were aimed at reversing these trends and boosting investor confidence (PwC Nigeria, 2021). The central question that emerges is whether these reforms have tangibly improved investment performance and economic productivity in the manufacturing sector, especially for listed firms that operate under stricter corporate governance. Between 2015 and 2025, Nigeria witnessed both continuity and dynamism in tax policy. The Federal Inland Revenue Service (FIRS) embarked on a digitization campaign to streamline tax collection, while efforts to harmonize state and federal tax administration were intensified (OECD, 2022). These developments coincide with global investment pressures and Nigeria’s quest to improve its Ease of Doing Business rankings. In theory, these reforms are expected to enhance macroeconomic stability and business predictability. However, the practical implications for the manufacturing firms, especially those listed on the Nigerian Exchange Group, require systematic evaluation in terms of capital formation, productivity, and profitability indices (Adebayo & Ogunyemi, 2022). Empirical insights on this subject remain mixed. While some studies posit that recent tax reforms have contributed positively to investment inflows and firm-level growth (Uchenna & Ume, 2020), others contend that the cost of compliance and unstable policy environment continues to negate expected gains (Nweke & Adegbite, 2023). Listed manufacturing firms offer a suitable context for empirical assessment due to the availability of financial disclosures and regulatory monitoring. By examining their investment patterns and productivity outcomes over a decade of reform, this study bridges the gap between policy intentions and industrial realities. This research is therefore critical in contributing to policy dialogue on taxation and economic development in Nigeria. It not only seeks to measure the effectiveness of tax reforms but also interrogates their structural impact on capital deployment, capacity utilization, and economic output of key industrial players. The study provides evidence-based insights for policymakers, tax authorities, investors, and academia on how tax structures influence economic behavior at the enterprise level, with broader implications for national development strategy Statement of the Problem Over the past decade, Nigeria has undergone significant tax reforms intended to enhance public revenue, stimulate investment, and foster economic growth. However, despite these reforms, the manufacturing sector continues to underperform, contributing only about 9% to GDP as of 2023, a marginal increase from previous years (National Bureau of Statistics [NBS], 2023). This raises concerns about the effectiveness of these fiscal interventions in generating real productivity gains and attracting sustainable investments in the sector. Listed manufacturing firms, which are expected to set industry benchmarks, appear constrained by persistent challenges such as high tax burdens, frequent regulatory changes, and infrastructure deficits. These contradictions suggest a disconnect between tax policy formulation and its intended impact on industrial productivity. Furthermore, the multiplicity and complexity of taxes imposed at federal, state, and local levels continue to undermine investment efficiency. Firms expend significant resources on compliance and litigation, which could otherwise be allocated to productive capital or research and development (Akinyele & Oseni, 2022). Although reforms such as the Finance Acts were enacted to streamline tax administration and reduce bureaucratic bottlenecks, anecdotal evidence from industry operators indicates that many reforms have either not been fully implemented or have had unintended consequences, including increased operational costs and uncertainty in investment planning. This paradox creates an urgent need to empirically determine whether the tax reforms of 2015–2025 have fostered or hindered economic productivity among listed firms. Moreover, prior studies tend to focus broadly on tax reforms and macroeconomic indicators, often neglecting sector-specific impacts, especially in the manufacturing domain where productivity is closely tied to policy stability and fiscal incentives (Onuoha & Aruwa, 2021). The limited availability of longitudinal, firm-level data on how tax reform has influenced investment behaviors, profitability, and value addition limits both scholarly discourse and policy accuracy. Consequently, there is insufficient clarity on whether Nigeria’s reform trajectory is facilitating or stalling the productive performance of its industrial base. This study is designed to fill this critical gap. By focusing on listed manufacturing firms, it provides a robust empirical basis for evaluating the microeconomic outcomes of Nigeria’s tax reforms. The research investigates how investment decisions, capital structure, and productivity outputs have responded to these fiscal policy changes over the ten-year period. The findings will inform future tax policy adjustments and development strategies to better align with Nigeria’s long-term industrial and economic aspirations. 1.3 Objectives of the Study The main objective of this study is to examine the impact of Nigeria’s tax reforms on investment and economic productivity of listed manufacturing firms between 2015 and 2025. Specifically, the study aims to: 1. Assess the effect of Nigeria’s tax reforms on capital investment decisions of listed manufacturing firms. 2. Evaluate the influence of tax policy changes on the economic productivity of listed manufacturing firms in Nigeria. 3. Determine the relationship between tax compliance costs and profitability of listed manufacturing firms. 4. Examine the mediating role of tax incentives in enhancing operational performance and capacity utilization of listed manufacturing firms. 1.4 Research Questions This study seeks to answer the following research questions: 1. How have Nigeria’s tax reforms influenced capital investment decisions of listed manufacturing firms? 2. What is the effect of recent tax policy changes on the economic productivity of listed manufacturing firms? 3. To what extent do tax compliance costs affect the profitability of listed manufacturing firms in Nigeria? 4. How do tax incentives mediate the relationship between tax reforms and capacity utilization among listed manufacturing firms? 1.5 Research Hypotheses The following null hypotheses are formulated to guide the study: H₀₁: Nigeria’s tax reforms have no significant effect on capital investment decisions of listed manufacturing firms. H₀₂: Tax compliance costs have no significant impact on the profitability of listed manufacturing firms in Nigeria. 1.6 Significance of the Study This study is significant in several ways. First, it contributes to the existing body of professional knowledge on fiscal policy and corporate investment behavior by offering sector-specific empirical insights on how tax reforms affect capital investment and productivity within Nigeria’s manufacturing sector. The findings will be of particular relevance to scholars and researchers in the fields of public finance, industrial economics, and tax policy by filling an important gap in longitudinal data analysis within the context of developing economies. Secondly, the outcomes of this study will serve as a practical resource for economic planners, tax administrators, and regulatory bodies such as the Federal Inland Revenue Service (FIRS) and the Nigerian Investment Promotion Commission (NIPC). The evidence-based findings on how tax policies influence firm performance will support the formulation of more inclusive and productivity-enhancing tax regimes. Health providers and professional associations within the manufacturing sector, such as the Manufacturers Association of Nigeria (MAN), may also utilize this data in advocating for policy reforms that consider the operational realities of the industry. Lastly, the study offers broader societal benefits by informing national discourse on economic sustainability and inclusive development. A more responsive tax system that enhances firm-level productivity directly contributes to job creation, GDP growth, and national income. Thus, the study not only addresses academic and professional audiences but also has implications for socio-economic development in Nigeria. 1.7 Scope of the Study This study is confined to examining the impact of Nigeria’s tax reforms between 2015 and 2025 on the investment behavior and economic productivity of listed manufacturing firms in Nigeria. The key variables under investigation include tax reforms (independent variable), investment decisions, economic productivity, tax compliance costs, and tax incentives (dependent and mediating variables). The focus is on assessing empirical relationships among these variables using secondary financial data and firm-level performance metrics. Geographically, the study covers firms listed on the Nigerian Exchange Group (NGX) operating within Nigeria’s manufacturing sector, such as those in the cement, food and beverage, chemical, and pharmaceutical sub-sectors. The population of the study includes all manufacturing firms quoted on the NGX as of 2025, from which a purposive sample will be drawn based on data availability and firm activity during the reform period. 1.8 Operational Definition of Terms Tax Reform: Systematic changes introduced into a country’s tax structure, including legislation, administration, and policy directions, aimed at improving revenue generation and economic efficiency. Capital Investment Decisions: Long-term financial decisions made by firms regarding the allocation of resources to fixed assets, which are influenced by taxation policy and macroeconomic expectations. Economic Productivity: The measure of output per unit input (e.g., labor, capital) within listed manufacturing firms, often evaluated through indicators such as return on assets, revenue growth, and output efficiency. Tax Compliance Cost: The financial and administrative burden incurred by firms in meeting tax obligations, including costs of filing returns, maintaining records, and dealing with audits. Tax Incentives: Fiscal policy tools such as exemptions, allowances, and credits provided by the government to encourage investment and enhance firm competitiveness in the manufacturing sector. Listed Manufacturing Firms: Industrial organizations that are publicly traded on the Nigerian Exchange Group and engage in the production of goods for domestic and international markets.