Faced with dwindling oil revenue, the Federal Government of Nigeria could not adequately fund public tertiary institutions. This led to infrastructural decay and low level of research and consequent decline in quality of tertiary education. To reverse the trend, Federal Government of Nigeria introduced education tax payable by all companies incorporated in Nigeria. This study empirically investigated the effect of education tax revenue (EDT) on economic development of Nigeria as well as the moderating effect of inflation. The study, anchored on Benefit Theory of Taxation, built a data set of 33year observations extracted from the Statistical Bulletin of the Central Bank of Nigeria, report of National Bureau of Statistics, Report of United Nation Development Programme. It measured economic development (ED) as the sum of natural logarithm of gross domestic product and human development index. The study employed autoregressive distributed lag technique to test the formulated hypotheses. Findings revealed that current EDT (lagged EDT) has a statistically negative (positive) effect on ED. It was also found that inflation has no moderating effect on the EDT-ED relationship. The study recommended that the Federal Government of Nigeria should sustain collection of EDT to fund public tertiary education in Nigeria.

Keywords: Autoregressive distributed lag, economic development, education tax revenue,                            Nigeria, tertiary education.