Dynamic Relationships among Oil revenue, Government Expenditure and Economic Growth in Nigeria

Abstract

This paper investigated the dynamic relationships among oil revenue, government expenditure, and economic growth in Nigeria between 1981 and 2023 using data sourced from the World Bank Development Database and the Central Bank of Nigeria Statistical Bulletin. The data were estimated using ARDL methodology, and specific analysis such as correlation studies, stationarity tests, hypothesis testing, cointegration analysis for long-run relationships, estimation of coefficients for short and long runs, and stability tests were estimated. After establishing a long-run relationship among the variables, the error correction model was estimated as well as the Granger causality test. The results of the short run and long run showed positive effects of government spending and oil revenue on economic growth. The Granger causality revealed that government expenditure Granger caused both oil revenue and economic growth in Nigeria over the period of the study. It is recommended that Nigeria diversify its economy away from oil exports.