Multivariate Time Series Analysis to Impact Assessment of Nominal Economic Indicators on Federal Government Revenue and Economic Growth in Nigeria

Abstract

Nigeria has all it takes to become Sub-Saharan Africa’s largest economy and a key contributor in the global economy as a result of her agricultural and natural resource endowment. Unfortunately, these resources are not sufficiently and efficiently utilized, resulting to some negative economic implications such as underdeveloped economy in world ranking, high unemployment status, poor standard of living, abject poverty, devaluating currency, lack of technological innovations and unstable economy among others. This paper investigates the impact of the Oil and Non-Oil producing sectors to Federal Government Revenue and Economic Growth in Nigeria, using the concept of multivariate time series vector autoregressive (VAR) model. The basic concepts and techniques of multivariate time series modelling and analysis such as Granger Causality tests; Lag Length Selection based on Information Criteria; Augmented Dickey-Fuller and Phillips-Perron Unit Root tests; Kwiatkowski-Phillips-Schmidt-Shin (kpss) Trend & Level Stationarity tests; Sectoral Contributions to Federal Government Revenue, Economic Growth and Growth Rates using Line & Bar Graphs are discussed in detail. The study applied a model for predicting annual Federal Government Revenue and Economic Growth at any time using their respective historical monetary values together with the historical monetary values of the other economic indicators. The empirical findings in this paper revealed that the Federal Government Revenue and Economic Growth are predictable using their historical values together with the historical values of the other indicators. Furtherance to the statistically significant contribution of both the Oil and Non-Oil producing sectors, it is imperative to diversify the Nigerian economy in order to boost Federal Government Revenue, improve the standard of living, alleviate poverty, create employment opportunities and accelerate a long-run sustainable Economic Growth and stability.