PETROLEUM PROFIT TAX AND ECONOMIC GROWTH IN NIGERIA

Abstract

The fundamental objective of this study was to investigate the relationship between Petroleum Profits tax and economic growth in Nigeria, against the backdrop of the monumental losses from tax evasion and avoidance in the petroleum upstream sector. The study spanned a period of 32 years from 1980 to 2011. Annual time series taxation and macroeconomic data were collected from the Federal Inland Revenue Service, Central Bank of Nigeria Statistical Bulletin and Federal Office of Statistics. A combination of co-integration and error correction estimation techniques were employed in the study. In addition, we ran a couple of diagnostic tests to check the adequacy of the specified model. As expected, Petroleum Profits tax was found to have a statistically significant positive relationship with real GDP growth rate having reported a positive coefficient of (4.64) and a robust t-value of (2.30). Total direct tax, with a positive coefficient of (4.19), and a t-value of (2.48), was also found to have positive impact on economic growth in Nigeria. Openness was found to have a negative and insignificant impact on economic growth having reported a negative coefficient of (-0.01), and t-value of (-0.15). Against the backdrop of the findings, we recommended that all companies in the petroleum upstream sector should be listed in the Nigeria Stock Exchange for transparency of transactions and accountability which would eventually translate rate increased revenue

Keywords: Co-integration, Economic growth, Openness, Petroleum profits tax, Resource rent rate, Stationarity, Total direct tax

Article Review Status: Published

Pages: 55-67 (Download PDF)

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