Paradox of oil revenue allocation and utilisation in resource-rich countries: The case of Nigeria

This paper examines the complex dynamics of oil revenue allocation and utilisation in resource-rich nations, with Nigeria serving as a case study due to its significance in global energy markets. Although oil revenues have long driven economic growth and government income, their management has often failed to yield sustainable development outcomes. Drawing on the resource curse and Dutch disease theories, the study explores how fiscal structures influence sustainable growth trajectories in resource-dependent economies. While the resource curse and Nigeria's oil paradox are extensively studied, this paper introduces a comparative fiscal performance framework built on four integrated indicators, Oil Revenue Share of GDP, Capital Expenditure Ratio (CER), CER vs. Budget Balance, and Sovereign Wealth Fund (SWF) Assets per Capita, to evaluate Nigeria's fiscal behaviour relative to contemporary resource-rich countries. The framework's originality lies in linking these indicators to institutional capacity and governance outcomes, revealing how Nigeria's fiscal structure reflects economic inefficiency, political centralisation, and weak subnational accountability. This analytical approach moves beyond descriptive analysis to assess fiscal sustainability and reform readiness. Using a time-series dataset (1981–2022), this study employs an ex-post facto design, Autoregressive Distributed Lag (ARDL) bound test, and judgmental sampling to uncover dynamic interactions among key variables. Findings show that oil revenue allocation has no significant long-run effect on Nigeria's sustainable economic growth. Policy recommendations include enhancing transparency in oil revenue management, empowering subnational governments, and linking oil revenues to human development through diversification, accountable governance, sovereign wealth management, and stable medium-term expenditure frameworks for sustainable, inclusive economic growth. • Oil revenue allocation has no long-run effects on the economic growth of Nigeria. • Transparency and accountability in oil revenue management are critical to economic development. • Transparency and accountability stand as pivotal elements in mitigating the mismanagement of oil revenue. • Resource-rich countries have profited from economic growth in the 1970s. • The ARDL approach has some benefits over regular cointegration testing.