Global Journal of Commerce & Management Perspective
Open Access

Abstract

The Effects of Petroleum Profit Tax, Interest Rate and Money Supply on Nigerian Economy

Olatunji, Toyin Emmanuel, Adegbite and Tajudeen Adejare

The study empirically examined the effects of Petroleum Profit Tax (PPT), Interest Rate (INTR) and Money Supply (MONSPL) on Nigeria economy. Data were obtained from Statistical Bulletins of Central Bank of Nigeria (1970 to 2010). Multiple regressions were employed to analyze the relationships among variables- Gross Domestic Product (GDP) as dependent variable and Petroleum Profit Tax, Money Supply and Interest Rate as independent variables. The short run effects of Petroleum Profit Tax (PPT) was positive, while that of Interest Rate was negative and the effects of Money Supply (MONSPL) was positive on economic growth. The effects on economic growth were significant with the adjusted R 2 of 96.83%. The output effects of the three variables on economic growth on the long run were positive with an R2 of 92.5% and adj. R2 of 0.8882. That is, economic growth on the long run may be explained up to 89% by these independent variables. It is therefore concluded that the income from petroleum had been beneficial to the Nigerian economy. Similarly, the interest rate regimes had been helpful to stimulate economic growth and the monetary policies implemented within the period had been effective in achieving regulation of money supply to spur economic growth. It is recommended that Government should transparently and judiciously account for the revenue it generates through PPT by investing in the provision of infrastructure and public goods and services. Furthermore the significance of the short run effects is for interventions to keep interest rates low to facilitate production