The empirical analysis of oil revenue and industrial growth in Nigeria

This study examined the impact of oil revenue on industrial growth in Nigeria. The data for this study were sourced from Organization of Petroleum Exporting Countries Bulletin, Central Bank of Nigeria (CBN), CIA World Fact Book, and National Bureau of Statistics (NBS), publications such as the CBN statistical Bulletin and CBN Economic and Financial Review Bulletin. ADF test was conducted for stationarity and variables were all integrated at first difference; Johansen co-integration test also revealed a long-run positive influence of oil revenue growth on the industrial growth in Nigeria; VEC estimates show that the coefficient of error correction term is insignificant though with the expected sign and low magnitude of 3.5%. The R2 of 0.9328 and R2 adjusted of 0.8717 collectively show that 87.17% of changes in industrial growth was explained by the movement in the explanatory variables incorporated in the model. The study recommended a sustained policy formulation and implementation in the industrial/petroleum sector of the economy through the involvement of stakeholders. The formulation and implementation of oil revenue should be judiciously used to facilitate infant industries through advanced industrial policies like import substitution, among others. Also, the government should be sensitive of company taxes and interest rates charged on loanable funds as it may scale many investors; it makes Nigeria economy more business friendly relative to other developing countries. Nigeria industrial sector should begin to focus on the production of capital goods while national security should be strengthened and tightened to curb the activities of Boko Haram, armed robbers, kidnappers and ethnic militants so as to protect and encourage investment in the country. Key words: Industrialization, oil revenue, diversification and company income tax.