The Impact of Oil Export Earnings on Government Income and Expenditure: A Policy Implication on Sustainable Development of the Nigerian Economy

Abstract

T his study examines the effect of oil fluctuation export earnings on government income and expenditure in Nigeria using a time series data from 1986 to 2015. The study utilized co-integration techniques and ordinary least square as the methods of analyses. The co-integration tests indicate the existence of a long-run equilibrium relationship between oil export earnings, government income, and expenditure. The results also show that oil export earnings have a positive impact on total government income and expenditure. However, the impact of oil export earning on government revenue was significant. Other variables that influence government income and expenditure are the total income and population size. The policy implication derivable from this study is that increase in government expenditure without a corresponding increase in revenue could widen the budget deficit. Therefore, the government should explore other sources of revenue especially the non-oil minerals sector, and also reduce the size of large recurrent expenditure and move towards capital and other investment expenditures.