An Empirical Investigation into the Effects of Crude Oil Price on Government Revenue in Nigeria

Babalola Adedayo Emmanuel*, Akindele Olawale Olamide and Rotimi Olufemi Henry
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Babalola Adedayo Emmanuel*: Adekunle Ajasin University, Akungba-Akoko, Ondo State, Nigeria
Akindele Olawale Olamide: Adekunle Ajasin University, Akungba-Akoko, Ondo State, Nigeria
Rotimi Olufemi Henry: Ekiti State University, Ado-Ekiti, Ekiti State, Nigeria

Sumerianz Journal of Economics and Finance, 2018, vol. 1, issue 1, 22-30

Abstract: Nigeria’s vulnerability to crude oil price fluctuations is a phenomenon which has become reoccurring effects and there was the need for emphasis on the need to establish the relationship effects of crude oil price on the Nigeria government revenue. This study, therefore, examined the impacts of oil price shock on government revenue in Nigeria, and, also analyzed its trend within the period under study (1983 – 2016). This study employed Vector Autoregressive (VAR) model to examine the short and long-run effects of crude oil price distortions on revenue in Nigeria. The impulse response analysis was carried out, the trend analysis was demonstrated and the time series properties of the data were tested by ADF unit root. The study found that government revenue was characterized with trended swing movements in same directions as the world oil price. The government revenue was negatively and significantly impacted by the world oil price in the first period and second period (-9.59006 and -9.82006 respectively). However both in the short run and long run, government revenue declined as a result of the impact of the world oil price shock. Consequently, the study suggested that the policy makers should focus on policy that will strengthen and stabilize the macroeconomic structure of the Nigerian economy with specific focus on alternative sources of government revenue (reduction of dependence on oil proceeds and diversify) and ensure fiscal discipline in governance.

Keywords: Crude oil; Price shock; Fiscal discipline; Dependence and vector autoregressive (VAR). (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (3)

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