Effects of Oil Revenue Generation on Government Budget Performance in Nigeria

Abstract

Oil revenue in Nigeria is indeed an important component of budget financing and economic growth. Revenues generated from oil have become a major determining point in defining the level of budget performance in the country. Prior to oil discovery in Nigeria, agricultural sector was the mainstay of Nigeria economy contributing to about 95% to her foreign exchange earnings and approximately 60% to her gross domestic product (GDP). In conducting this research, ex post factor research design was employed, and this study aims at critically analyzing the impact of oil revenue on the Nigerian Budget performance for a period of 25 years (1996 – 2020). Data used for analysis were collected from the Office of Accountant General of the Federation (OAGF), Central Bank of Nigeria (CBN) Statistical Bulletin 2020, and CBN Annual Reports of 2004, 2008, 2012, 2017 and 2020. Oil revenues as the independent variable was proxied by petroleum profit tax, while government budget performance was proxied by capital budget releases. The study further used descriptive statistics and ARDL (Auto Regressive Distributed Lags) to analysis the data, bound co-integration test was also used to determine the long run relationship between the two variables. The result shows that Petroleum Profit Tax has a positive and significant effect on budget performance (Capital Budget Releases) in Nigeria. The study therefore recommended that Government should have policies that will encourage proper monitoring of the oil revenue to achieve better budget performance.