IOSR Journal of Economics and Finance (IOSR-JEF) e-ISSN: 2321-5933, p-ISSN: 2321-5925.Volume 10, Issue 1 Ser. III (Jan. – Feb.2019), PP 60-68 www.iosrjournals.org DOI: 10.9790/5933-1001036068 www.iosrjournals.org 60 | Page Oil Revenue Shocks, Revenue Profile and Economic Performance in Nigeria. Abusomwan Rachael Eloho (Mrs.) 1 , Eguasa Beauty Ekiomado (Ph.D) 2 . (B.Sc, M.Sc, ACA, Ph.D In- view) Lecturer, Department of Accounting Faculty of Social and Management Sciences Benson Idahosa University (B.Sc, M.Sc, ACA, Ph.D) Lecturer, Department of Accounting Faculty of Social and Management Sciences Benson Idahosa University Corresponding Author: Abusomwan Rachael Eloho (Mrs.) Abstract: The focus of the study is examine the effects of oil price shocks on revenue stability and economic performance in Nigeria. The study employed a time series research design with extensive reliance on secondary data sourced from Central bank of Nigeria statistical bulletin spanning the period from 1994-2017. Contemporary time series econometrics techniques such as the unit root testing, vector autoregressive model (VAR), impulse response functions and variance decompositions were employed in the estimation of the data. The findings of the study reveals that initially, public expenditure appears to maintain it stability as it appears that other revenue sources may be able to shield it from the effects of oil revenue shocks in the short-run. This is threatened over time as oil revenue shocks takes it away from stability resulting in a very adverse decline. With respect to GDP, it is observed that oil revenue shocks does not have an immediate adverse effect in the initial stages. In the long run, GDP begins to drift into the negative region and this is maintained till the end of the period horizon. With respect to government tax revenue, the effects of oil revenue shocks is initially non- destabilizing, however in the long run a sharp decline into the negative region is observed and this appears to persist to the end of the period. On the overall, the impulse-response results show that oil revenue shocks have significant destabilizing influence on economic performance, public expenditure and government revenue in the long run. The key recommendation is the need for the economy to be less dependent on oil revenues and diversified to drive sustainable growth and development. Key Words: Oil revenue shocks, Economic Performance, Government Revenue --------------------------------------------------------------------------------------------------------------------------------------- Date of Submission: 26-01-2019 Date of acceptance: 09-02-2019 --------------------------------------------------------------------------------------------------------------------------------------- I. Introduction The oil rich developing economies are hard hit by the burst of the crude oil price bubble at the international market. This has created agitation on how the countries who are key players would respond economically to the shocks in the short and long-run. According to Dizaji (2012), oil price shocks are price fluctuations arising from either the changes in supply or the demand of the international oil market; so being a global commodity, the price of oil affects the global market, which by implication then affects economies. Fiscal volatility has been higher for resource-dependent economies than those whose fiscal policies are less dependent on export revenues and this implies that the non-oil sectors in most of Oil dependent economies are not well developed to contribute to growth of the fiscal balance. Fiscal balance would continue to be volatile if countries depend on oil revenue and fail to diversify their economic base. Nigeria is one of the countries heavily affected by the sharp decline in the revenue vis-à-vis the fall in the price of crude oil. It is recalled that, over the years, oil revenues are the main source of financing government expenditures and for importation of products to the country. Specifically, on average, 85% of government revenues come from oil export (Adedokun 2018). As such, the budget is usually affected by sudden negative or positive shocks to the oil prices. Oil revenue shocks would usually influence macro-economic performance through a number of channels. Oil prices transfer financial reserves from oil importing countries to oil-exporting countries through its trade. Increased oil prices decrease industry productivity through higher costs of manufacture and raised inf lation. It is empirically established that oil price is one of the most volatile prices which has significant impact on macroeconomic behavior of many developed and developing economies (Guo & Kliesen, 2005). Further, Salisu and Fasanya (2013) found volatility clustering and confirm the existence of asymmetries in oil price volatility. Therefore, the dependence of the Nigerian economy on oil proceeds as the major source of revenue is capable of raising suspicion about the impact of oil price volatility on macroeconomic volatility in the country.