Revenue Sources and Economic Growth in Nigeria: An Appraisal

Abstract

This paper appraises revenue sources in Nigeria; oil revenue, non-oil revenue and public debt decomposed into domestic and external debt with respect to its effect on economic growth in Nigeria. This analysis is contemporaneously imperative in the face of the global fall in oil prices and the impending danger of collapse of the Nigerian government’s ability to sustainably finance the economy due to over dependence on oil revenue. The Co-integration Test and granger causality test was conducted to appraise the long-run relationship between revenue sources and to examine direction of relationship between revenue sources and economic growth in Nigeria. Results shows that increase in OIL by one per cent increases GDP by 0.21%; same goes for NOIL increase by 0.25%; ED by 0.07% respectively except for DD by -0.26%. Then causation between revenue source and GDP portray that there is unidirectional relationship between GDP and OIL; bidirectional between NOIL and GDP; unidirectional relationship between GDP and DD and no causality between ED and GDP. To this effect, the paper recommends a review of revenue collection machinery, especially taxation, to ensure effectiveness and improved revenue remittances to government coffers. As a follow up, there is an urgent need to formulate economic policy to guarantee both domestic and external loans utilized in productive ventures for increased productivity.

Keywords: Oil Revenue, Non-oil Revenue, Domestic Debt, External Debt and Economic Growth