The Effect of Oil Tax Revenue on Economic Growth in Nigeria

Nigeria's fiscal policy faces challenges due to corruption, weak frameworks, and lack of fiscal discipline. The low tax-to-GDP ratio indicates untapped revenue potential. However, the country has considerable economic potential due to its population and natural resources. This study examined the effect of oil tax revenue on economic growth in Nigeria between 1986 to 2022. Autoregressive distributed lag modelling was used. The results indicate that oil tax revenue significantly drives economic growth in Nigeria, with a positive coefficient of 0.1966, meaning that an increase in oil tax revenue leads to a proportional increase in the long-run real GDP. However, the debt service ratio negatively impacts economic growth, as its increase leads to a decrease in log of real GDP (LRGDP). Although labor force and investment growth show positive coefficients, their effects on economic growth are statistically insignificant. Based on the study’s findings, the study recommended that the Nigerian government focus on enhancing the efficiency of oil tax revenue collection. This can be achieved by addressing challenges such as tax evasion, improving transparency, and ensuring that oil tax revenues are properly utilized for national development projects. An efficient oil tax revenue administration system would help boost the contributions of the oil sector to the national economy, which is crucial for sustained economic growth.