TAXATION AND PERFORMANCE OF MICRO, SMALL AND MEDIUM ENTERPRISES (MSMEs) IN NORTH CENTRAL NIGERIA
Keywords:
Taxation, Tax compliance, Tax burden, Multiple taxation, MSMEs performanceAbstract
Micro, small and medium enterprises (MSMEs) are central to employment creation, income generation, and poverty alleviation in Nigeria, yet firms in the North Central zone operate under a fragmented tax structure that has attracted far less empirical attention than the South West. This study investigates how tax compliance, tax burden, and multiple taxations shape MSMEs performance across six North Central states, and whether the quality of state level tax administration moderates these relationships. Anchored in Optimal Tax Theory, the study surveyed 384 MSMEs owner managers using a stratified random sampling technique and analyzed the data with Ordinary Least Squares and instrumental variable (two stage least squares) regression to correct for endogeneity in tax compliance. The results show that tax compliance significantly improves performance (β = 9.63, p < 0.001), while tax burden (β = –3.42, p < 0.001) and multiple taxation (β = –4.89, p < 0.001) significantly reduce it. Multiple taxation also erodes the performance gains associated with compliance (interaction β = –2.83, p = 0.009), whereas stronger tax administration significantly enhances performance (β = 6.21, p < 0.001). Kwara State recorded the strongest performance outcomes and the lowest incidence of multiple taxations, while Kogi State recorded the weakest outcomes on both counts. The study concludes that the effect of taxation on MSMEs depends as much on administrative quality and system coordination as on compliance behaviour itself, and recommends harmonizing overlapping levies, prioritizing Kogi, Benue, and Nasarawa States for administrative strengthening, and pairing tax reform with improved access to finance.
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