Effect of Oil Dependence on Sustainability of Nigeria’s Economy.

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Date

2016

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Published by Federal University, Gashua, Nigeria.

Abstract

Continuous sustainable economy for growth and development which remains the true essence of governance is threatened in Nigeria due to insufficient fund caused by dwindling oil revenue upon which the country relies for sustainability. This reliance had resulted into lack of sufficient funds for some states government and parastatals to cater for their expenditure needs. This work studied the effect of oil revenue dependence on Nigeria’s economy growth with with a view to determine the extent to which the country can sustain its economy (meet its recurrent (Rec_Expt), capital expenditures (Cap_Expt) and external debt servicing (Ext_Debt)) from its reliance on oil revenue. Modeling sustainability as the dependent variable, oil revenue (Oil_Revt) was the independent variable while non-oil revenue (Non_OilRevt) and (Ext_Debt) served as control variables. Fully Modified Least Square (FMOLS) Regression Technique was used to estimate the model over a 45 years’ period (1970-2014) while Augmented Dickey Fuller Unit Root Test and Single Equation Co-Integration Test were carried out. The study reveals that all the variables at 5% are stationery at I(1)with a long run relationships while oil revenue oscillates and dwindles during the period. It was also found that Oil_Revt is statistically significant (88% and 80%) respectively in sustaining Nigeria’s economy (financing the country’s Cap_Expt and Rec_Expt) while Debt servicing was found to be irregular. Non_OilRevt could only finance Rec_Expt by 20%, Cap_Expt by 12% but is negatively related to Ext_Debt). Since (Non_OilRevt) cannot sustain the economy, the downward trend in oil revenue spells doom for the country and as such swift diversification of the economy from oil revenue dependence to a country with multiple revenue sources is recommended alongside implementing strategies for blocking revenue leakage for Nigeria to become a truly independent nation with independence.

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Keywords

Oil Revenue, Non-Oil Revenue, Recurrent Expenditure, Capital Expenditure, Sustainability

Citation

10. Olaniyi, T. A.; Christopher, E.; & Abogun, S. (2016): Effect of Oil Dependence on Sustainability of Nigeria’s Economy. Gashua Journal of Science and Humanities. 2(2); 231-244, Published by Federal University, Gashua, Nigeria.

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