EVALUATING THE CORRELATION BETWEEN CRUDE OIL PRICE AND GOVERNMENT REVENUE IN NIGERIA, 2000-2024
DOI:
https://doi.org/10.18623/rvd.v23.6230Keywords:
Crude Oil Price Volatility, Government Revenue, Nigeria, Fiscal Stability, Econometric AnalysisAbstract
This research examines how fluctuations in crude oil prices affect government revenue in Nigeria from 2000 to 2024, a timeframe characterized by notable shifts in global oil prices and significant economic developments. The study aims to evaluate the volatility of crude oil prices, determine its impact on government revenue, and analyze the direct influence of oil prices on revenue generation. It focuses on the period from 2010 to 2024, utilizing a dataset of 300 monthly observations. Secondary data was collected from various sources, including the Nigerian National Petroleum Corporation (NNPC), Central Bank of Nigeria (CBN), World Bank, and the U.S. Energy Information Administration (EIA).). The data analysis employed rigorous econometric techniques, including the GARCH (1,1) model to measure volatility, ARDL bounds testing for cointegration, and OLS regression for hypothesis testing. The findings reveal that oil price volatility has a significant adverse impact on government revenue, with a coefficient of -187.456 billion Naira (p < 0.01), indicating a substantial decline in revenue for every unit increase in volatility. Conversely, a rise in oil prices positively affects revenue, yielding an additional 6.99 billion Naira per dollar increase. The study concludes that Nigeria's heavy dependence on oil revenue makes its fiscal stability highly vulnerable to global oil market volatility. Recommendations include the development of fiscal plans that insulate public spending from short-term oil revenue fluctuations, diversification of the economy to reduce reliance on oil, and the establishment of robust counter-cyclical fiscal strategies to lessen the effects of fluctuations in oil prices.
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