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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Babalola Adedayo Emmanuel* & Akindele Olawale Olamide & Rotimi Olufemi Henry, 2018. "An Empirical Investigation into the Effects of Crude Oil Price on Government Revenue in Nigeria," Sumerianz Journal of Economics and Finance, Sumerianz Publication, vol. 1(1), pages 22-30, 06-2018.
    • Handle: RePEc:sum:sjefsm:2018:p:22-30
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    References listed on IDEAS

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    Cited by:

    1. Charles O. Manasseh & Nnenna G. Nwonye & Felicia C. Abada & Ogochukwu Okanya & Anuli R. Ogbuagu & Felicia U. Eze-Dike & Osmond N. Okonkwo & Otene Samson & Okechukwu J. Akamike & John O. Okoh & Peter O, 2022. "Evaluating Oil Price Movement and Revenue Generation in Nigeria during Covid-19 Pandemic: Experience from Pre and Post Era," International Journal of Energy Economics and Policy, Econjournals, vol. 12(3), pages 57-65, May.
    2. Abubakar, Attahir Babaji & Muhammad, Mansur & Mensah, Samuel, 2023. "Response of fiscal efforts to oil price dynamics," Resources Policy, Elsevier, vol. 81(C).
    3. Obayelu, Abiodun & Ogunmola, Omotoso & Obayelu, Oluwakemi & Adeyemi, Oluwatosin, 2021. "Crude Oil Price Shocks and Food Production Output in Oil Producing and Exporting Countries: The Case Study of Nigeria," 2021 Conference, August 17-31, 2021, Virtual 315394, International Association of Agricultural Economists.

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