Oil Revenue and Economic Growth; an Empirical Evidence from Nigeria

Abstract

The study examined the effects of oil revenue on economic growth in Nigeria between 1980 and 2017. Time series data were sourced from secondary sources on Gross Domestic Product, Oil Revenue, Oil Rent and Domestic Price of Petrol. The analysis started by analyzing the descriptive statistics of the series and proceeded to examination of the stochastic characteristics of each time series by testing their stationary using Augmented Dickey-Fuller test. The ARDL model was used to estimate the coefficients of the parameters for both the short-run and the long-run. The F-statistics obtained from the bounds co-integration test shows a stable long run relationship between the variables. Findings from the study showed that in the long run, oil revenue and oil rent impacted on GDP positively although not significantly. In the short run however, both variables retarded economic growth in Nigeria. This goes a long way to show that the enormous windfall from crude oil in the nation has been mismanaged. The domestic price of petrol impacted positively on economic growth both in the long run and short run. The study therefore recommends a judicious use of the revenue generated from the oil sector to provide long term sustainable economic growth. In addition, due to the volatility and uncertainty in the oil sector in Nigeria, government should embark on a realistic diversification plan to alternative sectors of the economy to enhance the productive base of the nation seeing that crude oil is an exhaustible asset.

Nigeria’s Volatile Oil Revenue: Is There a Cause for Concern?

“…Olawunmi, et al (2018) also find a high correlation between oil price and oil revenue and economic growth. This conclusion is consistent with earlier work by Nweze and Edame (2016), Olayungbo and Kazeem (2017), Brown and Nnamaka (2019), Olayungbo (2019), andJabir et al (2020). The outcome in Saudi Arabia is consistent with those of other academics.…”