Petroleum Tax, Environment Quality and Economic Development in Nigeria

This study determined the effect of petroleum tax and environment quality on economic development, proxied by Real Gross Domestic Product, in Nigeria. The study covered a period of thirty-five years (1990 to 2024) and proxied petroleum tax and environment quality by hydrocarbon tax, petroleum profit tax, company income tax, charges on gas flared, and carbon emission. The study made use of time series data, sourced mainly from the Central Bank of Nigeria (CBN) Statistical Bulletin, National Bureau of Statistics (NBS) reports, and World Bank Development Indicators (WDI). The major technique of data analysis adopted was the Autoregressive Distributed Lag (ARDL) approach. The findings showed that hydrocarbon tax, petroleum profit tax, company income tax, and charges on gas flared have a positive and significant effect on Real Gross Domestic Product in Nigeria in both the short run and long run, while carbon emission has a negative and significant effect on Real Gross Domestic Product in the long run. Premised on the findings, the study concluded that petroleum tax plays a significant and vital role in enhancing economic development in Nigeria, while environmental degradation, proxied by carbon emission, contributes negatively to economic growth. The study recommended, among others, that government should strengthen hydrocarbon tax administration and ensure full compliance by oil-producing firms. More importantly, revenues generated from hydrocarbon taxes should be transparently channeled into productive sectors such as infrastructure, education, and healthcare, as this will further amplify its positive developmental impact. Effective monitoring by agencies such as the Federal Inland Revenue Service will ensure leakages are minimized and developmental outcomes are maximized.