Correlations between the Petroleum Industry and the Per Capita Income in Nigeria: Cointegration and Error Correction Model Approach by Olaniyi Evans

Evans, Olaniyi (2013): Correlations between the Petroleum Industry and the Per Capita Income in Nigeria: Cointegration and Error Correction Model Approach by Olaniyi Evans.

Abstract

In the literature, there has been an acquiescence that the greater the dependence on oil and mineral resources, the worse the growth performance of an economy. With time series data of Oil Revenue (proxy for petroleum industry), Non-oil Revenue, Investment and GDP per capital from 1970-2012, the paper explores the correlations between the petroleum industry and real per capita income in Nigeria. Using cointegration and error correction approach, the study finds that oil revenue has a positive and significant impact on per capital real income in the long-run. As well, the study shows that non-oil revenue and investment has insignificant impact on per capital real income, validating the fact that the entire economy is dominated by oil. Contrary to a report by the Ernst & Young (2013) which indicated that Nigeria’s per capita Gross Domestic Product is expected to cross the $2,000 threshold by 2017, Nigeria may not harness its petroleum revenues to lift its teeming population out of the vicious circle of poverty because only a small percentage of the population is employed in the petroleum industry. Therefore, Nigeria needs to develop other sectors of the economy. Some of the suggested means are: economic diversification, technology management, transparency, investments in education, domestic private ownerships, public involvement and strong institutions among others.

• Item Type: MPRA Paper
• Language: English
• Keywords: Petrolum industry, oil revenue, real per capital income, cointegration, error correction model, dutch disease
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook; L - Industrial Organization > L7 - Industry Studies: Primary Products and Construction; O - Economic Development, Innovation, Technological Change, and Growth > O2 - Development Planning and Policy

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