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Trivariate analysis of oil revenue, government spending and economic growth in Nigeria
Author(s) -
Fasanya Ismail O.,
Ogundare Abosede E.
Publication year - 2018
Publication title -
opec energy review
Language(s) - English
Resource type - Journals
eISSN - 1753-0237
pISSN - 1753-0229
DOI - 10.1111/opec.12124
Subject(s) - diversification (marketing strategy) , government revenue , revenue , economics , government spending , government (linguistics) , vector autoregression , exchange rate , gross domestic product , oil boom , real gross domestic product , dutch disease , monetary economics , macroeconomics , business , market economy , finance , linguistics , philosophy , welfare , marketing
Abstract This study examines the dynamic relationship between oil revenue, government spending and economic growth in Nigeria. Since the discovery of oil, oil proceeds have dominated the country's federation account and have improved public spending. In this paper, we analyse if the huge government spending has improved the rate of economic growth. To do this, the multivariate vector autoregression framework with special attention to Generalised Impulse Response Function is adopted in analysing the annual data of oil revenue, total government expenditure and real Gross Domestic Product from 1980 to 2015. We find evidence that oil receipts remain the major route which public spending is financed and the fundamental source for growth. Hence, there is need for the government to diversify the sources of foreign exchange inflow of the country. The diversification of the economy is required to insulate it from external shocks. It is recommended for Nigeria to explore ways of reviving its huge agricultural potential which has been neglected since the discovery of oil in addition to exploring its rich untapped solid minerals deposit in order to promote diversification of the economy away from a mono cultural product base.