Oil Revenue, Government Expenditure and Economic Growth in Nigeria: 1980-2016

Abstract

This paper analyses the link between oil revenue, government expenditure, and economic growth in Nigeria over the period from 1980 to 2016 empirically leaning on the model employed by Al-Qudair (2005). The study utilizes time series secondary data using econometric techniques which included cointegration, Vector Error Correction Model (VECM), and Granger causality to determine the direction of causality and the magnitude of impacts of the variables. The stationarity of the variables was tested by conducting the Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) unit root tests. The results, as presented in Table 4.1 showed strong evidence(s) that all the variables were integrated of order one, that is, I(1). Findings from the analysis revealed that oil revenue Granger caused both of total government spending and growth, while there was no-causality between government spending and growth in the country. We therefore recommended that government should increase spending on capital projects as well as intensify efforts at increasing output in the oil sub-sector in order to boost economic growth in Nigeria.