Responsiveness of Petroleum Profit Tax to Foreign Direct Investment in Africa, Case Study Of Nigeria and Algeria
Abstract
This study aimed to assess the responsiveness of Petroleum Profits Tax to Foreign Direct Investment (FDI) in Africa, focusing on Nigeria and Algeria. An ex-post research design was adopted, with data sourced from the Central Bank Statistical Bulletin, the Federal Inland Revenue Service Annual Reports, and World Bank Indicators. A model grounded in empirical and theoretical studies was developed, where foreign direct investment inflows into Nigeria and Algeria served as the dependent variable, and Petroleum Profits Tax as the independent variable. The Fully Modified Least Squares (FMOLS) method was employed for data analysis. The results revealed a significant negative impact of Petroleum Profits Tax on FDI in both countries, with a p-value of 0.0078. It was concluded that the tax deters foreign investment in Nigeria and Algeria. Consequently, it was recommended that governments and relevant monetary authorities revise current tax policies by reducing tax rates and offering tax incentives and relief to companies operating in the downstream sector, to foster greater investment. This research is original and the sole authorship belongs to the researcher.
Keywords: Taxation, Foreign Direct Investment, Petroleum Profit Tax, Tax Relief, World Bank variables
Acknowledgement: We the authors acknowledge that this work is entirely our work and is free from conflict of interest
DOI: https://doi.org/10.54663/2182-9306.2025.SpecialIssueMBP.139-157
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