The effects of oil and non-oil sectors on economic growth in Nigeria (1981–2023)

This study examines the long-run and short-run dynamics between oil revenue, non-oil revenue, exchange rate, and capital investment in relation to Nigeria's economic growth and the performance of its non-oil sector from 1981 to 2023. Employing the Autoregressive Distributed Lag (ARDL) framework, the analysis is based on two models: Model 1 focuses on the impact of these variables on real gross domestic product (RGDP), while Model 2 investigates their influence on non-oil revenue (NONOIL). The ARDL bounds testing procedure confirms the existence of a long-run cointegrating relationship in both models, indicating that the variables move together over time and converge toward equilibrium despite short-term fluctuations. In Model 1, the results show that non-oil revenue is the only variable with a significant and positive long-run effect on economic growth, while oil revenue, exchange rate, and capital formation are not statistically significant. In Model 2, oil revenue exhibits a significant positive long-run effect on non-oil revenue, suggesting that, when strategically managed, oil income can support the development of Nigeria's non-oil sector. Short-run coefficients in both models are mostly insignificant, but the error correction terms are negative and significant, further confirming stable long-run adjustment dynamics. These findings shows the necessity of transitioning from oil dependence toward a diversified fiscal structure. Policymakers are encouraged to invest oil windfalls into productive sectors and strengthen non-oil revenue institutions, as long-run growth is more effectively supported through a broadened revenue base. The confirmation of long-run equilibrium relationships reinforces the importance of sustainable and consistent economic policy interventions. Key Words: ARDL, oil revenue, non-oil revenue, economic growth, cointegration, Nigeria, fiscal diversification