Abstract

The study examined the effect ofpetroleum profit tax on Nigerian economy using some selected economic performance indicators between 1986 and 2019. It specifically. i. determined the effect ofpetroleum profit tax on per capita income (PCI) ofNigerians; ii. Examined the effect of petroleum profit tax revenue on government expenditure on the education sector; Hi. Evaluated the effect ofpetroleum profit tax revenue on govei nment 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-postfacto research design and data were sourced from relevant publications the Central Bank of Nigeria statistical bulletins, and those of the National Bureau of Statistics. The exogenous variable for the study was 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 ofthe regression estimate such as the r-squared of89% approximately andf-statistics which has a significance of 1%. It 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 fistatistics that has probability of 1%>. The result obtainedfrom the fourth hypothesis showed that petroleum profit tax has significant impact on health expenditure in Nigeria. The result is premised on the positive outcome ofthe beta coefficientfor 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 offit since the r-squared is 86% and probability of the f-statistics is at 1°%. Based on the findings, the study therefore concludes that there is a positive and significant association between petroleum profit tax revenue collected and thefour test variables used in this study. The study therefore concludes that there is a positive effect ofincome 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 '.his study that petroleum profit tax and by extension tax revenues has significant positive impact on various government expenditures. This is because robust regression estimate obtained for petroleum profit tax and various government expenditures suggest that oeti oleum pi ofit tax may account for a large part of total government income obtained via axation. This reflects a picture ofmore than proportionate dependence on the oil sector of 'he economy to generate national income.