THE EFFECT OF PETROLEUM TAX, EXCHANGE RATE AND EXTERNAL DEBT ON ECONOMIC GROWTH IN NIGERIA
Abstract
This study examined the effect of petroleum tax, exchange rate and external debt on economic growth in Nigeria from 1980-2023 Data employed for this study was elicited from World Bank Data Base-World Developmental Indicators of 2022 and Central Bank of Nigeria Statistical Bulletin of 2022. This study employed economic growth (GDP) which is the dependent variable where Petroleum profit tax (PPT), Non- oil Tax Revenue (NOT), Exchange rate (EXR), External Debt (EXD), and Interest Rate (INT) are independent variables. This study employed Auto Regressive Distributed Lag (ARDL) Model to analyze data; other diagnostic tests such as: stability test, Auto correlation test, Heteroskedasticity test and BreuschGodfrey Serial Correlation LM test were also carried out and they confirmed the validity and reliability of the model employed. result revealed a significant positive relationship between petroleum profit tax and exchange rate and economic growth in Nigeria over the study period. While non-oil tax revenue, external debt and interest rate was found to have a negative and statistically significant effect on economic growth in Nigeria. Beside the long-run model estimation, a short-run model was also estimated to ascertain the dynamic nature of the relationship between the dependent and independent variables. The short-run result indicates a significant positive relationship between petroleum profit tax, exchange rate and interest rate were found to have a significant and positive relationship with economic growth. The policy recommendation that Government should reduce the tax incentives granted to petroleum companies in Nigeria, and increase the tax rate of non-petroleum companies, which will increase government revenue from petroleum taxes, during times of oil price volatility and production cuts. Policy-makers should adopt a balanced approach in managing the exchange rate. Efforts should be made to maintain a competitive exchange rate that promotes exports while implementing measures to mitigate inflationary pressures and manage import costs effectively. Continual monitoring and evaluation of the impact of debt burden, exchange rate policies, and physical capital investment on economic growth are crucial
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