The Effect of Oil Revenue on Economic Growth in Nigeria : Evidence from Quantile Regression Method

This study examines the effect of oil revenue on the distribution of economic growth across different quantiles in Nigeria over the period from 1981 to 2018. To achieve this objective, the study employs a quantile regression method. For robustness, the quantile regression results are compared with the OLS estimation results. From the OLS results, it is found that oil revenue has a positive and significant effect on economic growth. Precisely, an increase in oil revenue by 1% leads to an increase in economic growth by 0.184%. However, the quantile regression results show that oil revenue’s positive effect on economic growth varies over quantiles. At lower quantiles (5th, 10th), even though oil revenue exerts a positive effect on economic growth, the effect is not statistically significant. At the 25th quantile, an increase in oil revenue by 1% leads to an increase in economic growth by 0.137% which further increase to 0.186% and 0.279% at the 50th quantile and 75th quantile respectively. At the upper quantiles (90th and 95th), the effect of oil revenue on economic growth becomes statistically insignificant even though it is still positive. In fact, by controlling for other determinants of economic growth such as investment, human capital and trade openness, oil revenue losses a significant effect on the economy. This study further finds that human capital and investment spur economic growth while trade openness seems not to have any significant effect on it across the quantiles. Given the findings, it is very important for policymakers to judiciously use the oil revenue by investing it in the critical sectors of the economy, especially during the windfall