The impact of fiscal policy on stimulating domestic investment in Nigeria: An evaluation of tax incentive schemes in Kaduna State (2000–2020).
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Background of the study
Fiscal policy is instrumental in shaping domestic investment climates, particularly through tax incentive schemes aimed at encouraging capital formation and business expansion. In Kaduna State, various tax incentives introduced between 2000 and 2020 have been designed to stimulate domestic investment by reducing the effective tax burden on businesses, thereby increasing their profitability and competitiveness (Ibrahim, 2023). These incentives include tax holidays, reduced corporate tax rates, and investment allowances that seek to attract both local and foreign investors. Empirical evidence suggests that such fiscal measures can significantly boost investment by increasing available capital, spurring innovation, and fostering economic diversification (Oluwaseun, 2023). However, challenges such as policy inconsistency, loopholes in tax administration, and regulatory uncertainties have sometimes limited the effectiveness of these incentives (Chinwe, 2024). The interplay between fiscal incentives and domestic investment is complex, influenced by external economic conditions and internal administrative capacities. This study critically examines the impact of tax incentive schemes on stimulating domestic investment in Kaduna State, providing a basis for refining fiscal policies to enhance investment and promote sustainable growth (Ibrahim, 2025).
Statement of the problem
Despite the implementation of various tax incentive schemes, domestic investment in Kaduna State has not reached expected levels. Persistent issues such as policy inconsistencies, inefficient tax administration, and regulatory ambiguities have undermined the potential of fiscal incentives to drive investment (Ibrahim, 2023; Chinwe, 2024). These challenges contribute to investor uncertainty and limit capital inflows into key sectors. This study seeks to identify the factors that impede the success of tax incentives and to propose strategies that can optimize fiscal policy to better stimulate domestic investment.
Objectives of the study:
- To assess the impact of tax incentive schemes on domestic investment.
- To identify challenges in fiscal policy implementation.
- To recommend strategies to enhance fiscal incentives.
Research questions:
- How do tax incentives affect domestic investment in Kaduna State?
- What challenges hinder the effectiveness of these fiscal policies?
- What reforms can improve the impact of tax incentives?
Research Hypotheses:
- Tax incentives positively influence domestic investment.
- Policy inconsistencies reduce the effectiveness of fiscal incentives.
- Enhanced administrative efficiency improves investment outcomes.
Significance of the study
This study is significant as it examines the role of fiscal policy—specifically tax incentive schemes—in stimulating domestic investment in Kaduna State. Its findings will guide policymakers in refining fiscal strategies to create a more attractive investment climate, ultimately fostering economic growth and job creation. By addressing existing barriers, the study aims to contribute to more sustainable and balanced economic development (Ibrahim, 2025).
Scope and limitations of the study:
This study is limited to evaluating tax incentive schemes and their impact on domestic investment in Kaduna State, focusing on fiscal policy and regulatory aspects.
Definitions of terms:
- Fiscal Policy: Government strategies involving taxation and public expenditure.
- Tax Incentive Schemes: Programs designed to reduce tax liabilities to stimulate investment.
- Domestic Investment: Capital investments made within a country’s economy.
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