Electricity Fluctuations and Tax Revenue in Sub-Saharan Africa: Insights from a Bias-Corrected Linear Dynamic Panel Model

Inadequate electricity and its frequent fluctuations adversely affect the productivity and profits of small and medium enterprises in sub-Saharan Africa (SSA). These fluctuations also affect economic growth, narrowing further the region's low tax base. However, studies examining the effects of electricity on the tax base in SSA at the macro level are limited. This study bridges this gap by examining electricity fluctuations' effects on SSA countries' tax revenue. A bias-corrected linear dynamic estimator using a panel dataset for forty-one (41) SSA countries from 2000-2022 is employed for analysis. The study noted that electricity consumption is positively related to the tax base while electricity fluctuation creates critical fiscal losses regarding what the tax base would become in ordinary situations. The results indicate that the African governments in SSA need to increase investments in electricity infrastructures and diversify energy sources. Furthermore, SSA governments must renovate and strengthen the existing electricity infrastructures while upgrading the Internet of Things (IoTs) at the same time. Inclusively, mitigating power outages that are hindering the growth of the tax revenue base in SSA countries is important for achieving sustainable economic growth.