Dynamic Nexus between Oil Revenues and Economic Growth in Nigeria

This study examines the dynamic asymmetric relationship between oil revenues and economic growth in Nigeria. Employing a Non-Linear Autoregressive Distributed Lag (NARDL) method in conjunction with an Autoregressive Distributed Lag (ARDL) method and a Threshold Autoregressive Error Correction Model (TAR-ECM) on Nigerian data, spanning the period from 1981 to 2016, the study finds that there is co-integration between oil revenues and economic growth. When the ARDL estimation method is used, we find that oil revenues have significant positive effects on economic growth in both the short-run and long-run. The results from NARDL show the existence of shor-trun and long-run asymmetric relationships between oil revenues and economic growth with the exception of the case in which an industrial production index is used as a proxy for economic growth. Also, the NARDL results further show that positive oil revenues are beneficial to the economy. However, the positive impact of oil revenues on the economy is gradual as shown by the results obtained from the TAR-ECM estimation method. This calls for a better management of oil revenues so as to guard against the negative impacts of oil price volatility and shortage of revenue during periods of negative developments in the oil market.