ABSTRACT

This study examined the effect of petroleum profit tax on Nigerian economy using some selected economic performance indicators between 1986 and 2019. It specifically: i. determined the effect of petroleum profit tax on per capita income (PCI) of Nigerians; ii. Examined the effect of petroleum profit tax revenue on government expenditure on the education sector; iii. Evaluated the effect of petroleum profit tax revenue on government expenditure on the agricultural sector and iv. assessed the effect of petroleum profit tax revenue on government expenditure on the health sector. The study adopted the ex-post facto research design as data were already in existence and was sourced from relevant publications the Central Bank of Nigeria statistical bulletins, and the releases of the National Bureau of Statistics. The exogenous variable for the study is Revenue from Petroleum Profit Tax while the endogenous variables are per capita income, government expenditure on education, government expenditure on health, and government expenditure on agriculture. Simple Linear Regression was used to test the hypotheses. The result obtained showed a positive beta coefficient for petroleum profit tax as against per capita income at 1% statistical significance. The result gave residual statistics to support the strength and relevance of the regression estimate such as the r-squared of 89% approximately and f-statistics which has a significance of 1%. The analysis of the second hypothesis also revealed that petroleum profit has significant impact on government expenditure on education. The result further showed that petroleum profit tax impacts positively and significantly on agriculture expenditure at the lag of 6 years. The regression result was further strengthened by the residual outcomes which reflected r-squared of 73% and f-statistics that has probability of 1%. The result obtained from the fourth hypothesis showed that petroleum profit tax has significant impact on health expenditure in Nigeria. The result is premised on the positive outcome of the beta coefficient for petroleum profit tax as against government expenditure on health at the lag length of 2 years. The residual statistics supported the regression estimation by showing a goodness of fit since the r-squared is 86% and probability of the f-statistics is at 1%. Based on the findings reported during tests of all four hypotheses raised in this thesis, the study therefore concludes that there is a positive and significant association between petroleum profit tax revenue collected and the four test variables used in this study. In other words, government revenues from petroleum profit tax flows in the same direction as per capita income of Nigerians, expenditure on education, Agriculture and health as a measures of the nation’s economic performance. The study therefore concludes that there is a positive effect of income from petroleum profit tax and the economic indices investigated. The study therefore recommends that the attitude of Nigerians to taxation should be encouraged to grow into voluntary compliance to tax since it has been proved in this study that petroleum profit tax and by extension tax revenues has significant positive impact on various government expenditures. The Nigerian government should endeavor to solve adequately the current national problem of mono-economy. This is because robust regression estimate obtained for petroleum profit tax and various government expenditures suggest that petroleum profit tax may account for a large part of total government income obtained via taxation. And this reflects a picture of more than proportionate dependence on the oil sector of the economy to generate national income.