Non-Oil Revenue and Economic Growth of Nigeria (1981 to 2019)

The study investigated the impact of non-oil revenue on the economic growth of Nigeria for the period 1981 to 2019. The Autoregressive Distributed Lags (ARDL) technique was adopted alongside the unit root test, which showed that in all cases, the variables in level form were non-stationary but their first differences were found to be stationary. This shows that all the variables (including economic growth) are co-integrated at order 1. The short run diagnostic tests in the result are generally impressive since the adjusted R-squared value of 0.68 is relatively high and indicates that 68 percent of the short-term changes in economic growth is explained by the explanatory variables. The Durbin-Watson statistics is also impressive at 1.95, indicating the complete absence of autocorrelation in the model. However, in the long run the coefficient of tax revenue (TAXR) is significant among the non-oil revenue variables. This coefficient is positive and passes the significance test at the 5 percent level. This means that increased tax revenue leads to economic growth in the long run. A one percent rise in tax revenue in the current period will lead to a 0.656 percent growth in the economy over a long period. The coefficient of the other non-oil revenue variable (NTAXR) fails the test at the 5% level of significance. However, given that tax revenue is the main non-oil revenue, the result shows that non-oil revenue will most likely improve economic growth in Nigeria. For the other variables, only the coefficient of human capital (HUC) passes the significance test at the 5 percent level. The results of the study show that economic growth Granger causes nontax revenue inflow, rather than the other way around. This clarifies why NTAXR did not pass the significance test in the regression result. On the other hand, tax revenue Granger causes economic growth. These results indicate that a reverse relationship exists between economic growth and non-oil revenue, through the component of non-tax revenues. Finally, the study recommends that development of policies that will increase tax revenue is key to economic growth. Similarly, the researcher also recommends that investment in human capital development will boost economic growth of Nigeria both in the short and long run