Effect of Crude Oil Revenue on the Oil and Non-oil Sectors in Nigeria

The debate for oil-rich economies to plough their oil windfalls into real economic activities to spur diversification has become intense due to the deficit fiscal crisis and poor socio-economic profile of resource-abundant nations. Therefore, we use secondary data from the period between 1981 and 2020 to assess the impact of crude oil revenue on the oil and non-oil sector output performance in Nigeria. The study adopts the ARDL (i.e. autoregressive distributed lag) and the augmented Granger causality techniques to analyse the data. The ARDL regressions show that crude oil positively impacts oil sector performance, but the impact is only substantial in the short run. Crude oil revenue exerts a positive and insignificant effect on the short-run non-oil sector output, whereas, over the long run, it has a negative but significant effect. To propel growth, the study recommends using the excess crude oil earnings to develop non-oil sectors such as agriculture, services, and manufacturing.