Taxation Project Topics

Administration of Petroleum Profits Tax in Nigeria 1970-2020

Administration of Petroleum Profits Tax in Nigeria 1970-2020

Administration of Petroleum Profits Tax in Nigeria 1970-2020

Chapter One 

Objectives Of The Study

The main objective of this study is to assess the Administration of petroleum profits

tax in Nigeria 1970-2020; it will evaluate the effect of petroleum profit tax and company income tax on economic growth in Nigeria. Other specific objectives are to:

  1. examine the effect of petroleum profit tax on gross domestic product in Nigeria;
  2. assess the effect of company income tax on gross domestic product in Nigeria.




Our focus in this chapter is to critically examine relevant literature that would assist in explaining the research problem and furthermore recognize the efforts of scholars who had previously contributed immensely to similar research. The chapter intends to deepen the understanding of the study and close the perceived gaps.

Precisely, the chapter will be considered in three sub-headings:

  • Conceptual Framework
  • Theoretical Framework
  • Empirical framework


An Overview of Taxation

Tax is a compulsory contribution imposed upon persons and firms by a public authority to cover government expenses (Attamah, 2004). Attamah opined that tax is a good source of revenue to government, as it is regularly imposed annually or as government thinks fit. He affirmed that income from taxes on people and firms play critical roles in any nation‟s economic growth and development. Tax administration and collection is a major problem facing taxation world wide. Bad administration and collection of tax has led to tax evasion. Udabah (2002) referred to tax as an evil necessary to meet the cost of those services a society wishes its government to provide.

According to Udabah, tax is an obligatory transfer from tax payers to the public authority. Udabah argued that taxation was originally formulated to raise revenue so as to cover the state expenditure. Today however, it has been assumed to play a more far reaching role which includes curtailing the consumption of harmful commodities, to regulate the production of certain commodities. It is used as an instrument of economic policy, to control monopoly, curb inflation, to protect infant industries, etc. The Institute of Chartered Accountants of Nigeria (2014) and the Chartered Institute of Taxation of Nigeria (2002) defined tax as an enforced contribution of money to government pursuant to a defined authorized legislation. New Webster Dictionary also defines it as a charge imposed by government authority upon property, individuals or transactions to raise money for public purposes.

Origin of Petroleum

Petroleum is a naturally occurring liquid, consisting of a complex mixture of hydrocarbons of various molecular weights and other organic compounds formed from the fossilized remains of dead plants and animals by exposure to heat and pressure in the earth’s crust over hundreds of millions of years.

There is evidence that crude petroleum has been in use in us in one form or the other for over 5000 years an unrefined state has been utilized by humans for over 5000 years. Evidence is that by the 8th century, Streets of Baghdad were paved with tar derived from petroleum. Also, in the 9th century, oil fields were exploited in the area around modern Baku in Azerbaijan to produce naphtha (Ajram, 1992). Petroleum was said to have been distilled by Al- Razi in the 9th century, to produce kerosene in the alembic which he used to invent kerosene lamps for use in the oil lamp Industry (Bilkadi, n.d). In 1825, the Russian empire produced 3,500 tons of oil and doubled this by the middle of that century. At the turn of the 20th century, Imperial Russia’s output of oil, almost entirely from the Apsheron Peninsula, accounted for half of the world’s production and dominated international markets (Akiner & Aldis, 2004).

Nearly 200 small refineries operated in the suburbs of Baku by 1884. The first modern oil refineries were built in Poland from 1854–56 (Frank, 2005). The refined products were used in artificial asphalt, machine oil and lubricants.

The first large oil refinery opened at Ploiesti, Romania in 1856. Oil drilling in the United States began in 1859, in Titisville, Pennsylvania. However, by the first quarter of the 20th century, the United States overtook Russia as the world’s largest oil producer.

The Superior Oil Company (now part of Exxon Mobil) built the first offshore oil platform off the Gulf Coast of Louisiana in 1938. By the end of World War II, the Middle East had gained ascendancy in Oil production.






In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.

 Research Design

Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem.

A time series research design is adopted in this study due to the nature of the variables under study. Because the variables assume different values at different times, data at different times extracted from relevant sources.

Nature And Sources Of Data

Secondary data is extracted from various reports of the Federal Inland Revenue Service (FIRS) and the Central Bank of Nigeria (CBN) statistical bulletin 2020, Federal Ministry of Finance and Nigerian National Petroleum Corporation Annual Statistical Bulletin 2014 were used in this study. This is because the estimation of the model in the study requires the use of time series data. The macroeconomic data consist of Petroleum Profit Tax (PPT), Company Income Tax (CIT) and Economic Growth (EG) between 1970 and 2020 in Nigeria. Regression technique was adopted as our tool of analysis as it was found appropriate for the data analysis.





 Summary of findings

This study has been able to analyze the Administration of petroleum profits tax in Nigeria, 1970-2020. Chapter one introduces petroleum profit tax and company income tax. chapter two extracts the relevant work of other researchers who have carried out research relating to petroleum profit tax and company income tax. Section three is based on the methodology which focuses on the sampling technique that was used by the researchers in solving the hypotheses. A time series research design was adopted by the study, data was obtained from Central Bank of Nigeria Statistical Bulletin 2014, Federal Ministry of Finance and Nigerian National Petroleum Corporation Annual Statistical Bulletin 2014 and co-integration regression analysis was adopted. Based on the result of the study below:


This study has been able to describe the roles that petroleum profit tax and company income tax play in the economic growth in Nigeria. Nigeria has the potential to build a prosperous economy, reduce poverty significantly, and provide the health, employment generation, education, and infrastructure services to its population needs. Considering the positive and significant relationship between petroleum profit tax, company income tax and economic growth in Nigeria, there is an urgent need for government to prioritize her needs as petroleum revenue continues to decrease and a situation where most of registered firms were not in the tax system. Economic growth cannot be achieved in a country where vast majority of her populace living below expectation, a situation similar to what is being experienced in the country where, capital expenditure is wholly financed through debt and the entire oil revenue for the federal government is used for recurrent items.


Based on the findings made in the course of this study, it is recommended that:

– Government should expand the tax yield through improved tax system administration. This is because of the danger of over-reliance on crude oil export receipts to drive the economy.

– Government should transparently and judiciously account for the revenue it generates through petroleum profit tax and company income tax by investing in the provision of infrastructural facilities. It is expected that the more effectively and efficiently revenue is utilized by government to create employment opportunities, satisfy the basic needs of her population, sustain her quest for the development.

– Government should try to diversify the economy. In so doing, revenue accrue to government through petroleum profit tax should be judiciously used to develop other sectors, especially in developing other mineral resources and agricultural sector since the country has what it takes in terms of fertile land, favourable climate and manpower which will lead to economic growth.

In addition to this, government policy should be directed towards creating conducive or investment friendly environment that will attract foreign investors into the country, any increase in investment has the potential of creating job opportunity for the citizens. It is of the view that government should minimize or find ways of eliminating totally the widespread corruption and leakages in the petroleum profit tax and company income tax administration.

The Federal Inland Revenue Service (FIRS) should properly monitor the activities of companies to achieve optimum collection of taxes payable to the government as Company Income Tax (CIT) is a potential source of alternative income as well as improve condition for companies to flourish.


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  • Adekanola, O. (2007). Taxation as a means of economic revitalization: Limitations and Prospect in a developing economy, Lagos. The Institute of Chartered Accountants of Nigeria, 40(4), 48-59.
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