International Journal of Economics, Commerce and Management United Kingdom Vol. II, Issue 11, Nov 2014 Licensed under Creative Common Page 1 http://ijecm.co.uk/ ISSN 2348 0386 ERROR CORRECTION MODELING OF PETROLEUM PROFIT TAX AND INCOME PER CAPITA IN NIGERIA Gado, N D Department of Business Administration, Bingham University, Nasarawa State, Nigeria nuhugado@yahoo.com Obumneke, Ezie Department of Economics, Bingham University, Nasarawa State, Nigeria eobumneke@binghamuni.edu.ng, eobumneke@yahoo.com Abstract The paper undertakes an empirical research on the impact of petroleum profit tax on per capita income of Nigeria. The log linear error correction model was adopted to examine whether petroleum profit tax (PPT), Custom and excise duties (CED) and oil revenue exports (ORE) had an impact on Nigeria’s per capita income (PCI). Unit root test was carried out on each of the variables to determine their level of stationarity. They were however found stationary after first difference (that is, they are all integrated of order one (I(1)). Therefore it was safe to proceed with Johansen Cointegration Test. The integrated variables were then used for the regression analysis. The cointegration result showed that the variables used in the model have a long term, or equilibrium relationship between them. It was observed that from the analysis that PPT and CED were found statistically insignificant and both had negative relationships with economic development in Nigeria, while oil export revenue had a positive impact and is statistically significant. These negative relationships and insignificancy of PPT and CED could be attributed to corruption, inadequate record keeping and mis-management of generated funds. The study thus recommends that Government should transparently and judiciously account for the revenue it generates through PPT and CED by investing in the provision of infrastructure and public goods and services. Keywords: Petroleum, Tax, Per capita income, Economic Development, Co-integration, Error correction model