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Do Fiscal Incentives Promote Investment?: Empirical Evidence from Nigeria

From: The Journal of Developing Areas
Volume 47, Number 2, Fall 2013
pp. 17-35 | 10.1353/jda.2013.0029



This study conducts an empirical investigation of the effects of fiscal incentives on investment in Nigeria. We constructed two indexes of fiscal incentives which track the different types and stages of incentives embarked upon since the 1970s and these indexes are then included in both private investment and foreign direct investment equations. The empirical results showed a significant negative effect of fiscal incentives on both private investment and foreign direct investment in Nigeria. Rather than focusing on fiscal incentives, the country should concentrate on removing the factors that discourage investors such as infrastructural bottlenecks, poor institutions and good legal framework.

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