Sectoral Analysis of Oil and Non-Oil Tax Contributions in Nigeria and their Implications for Economic Diversification

This study examines the sectoral contributions of oil and non-oil tax revenues in Nigeria and their implications for economic diversification. Given Nigeria’s historical dependence on oil tax revenues, the volatility of global oil markets has raised concerns about fiscal sustainability. Using Generalized Least Squares (GLS) regression, Vector Autoregression (VAR) models, and Cointegration Analysis, this research evaluates the relationship between tax revenue composition and economic diversification over the period 2010–2021. The findings indicate that non-oil tax revenues have a stronger and more stable impact on economic growth and diversification than oil tax revenues. The results support the Resource Curse Theory and Fiscal Neutrality Theory by demonstrating that an overreliance on oil taxation creates structural inefficiencies while a diversified tax structure enhances fiscal stability. The study highlights challenges such as weak tax compliance, inefficient tax collection, and a narrow tax base, emphasizing the need for policy reforms to enhance non-oil tax revenue mobilization. Recommendations include broadening the tax base, improving tax administration, investing in non-oil sectors, and strengthening public-private partnerships to foster sustainable economic growth. The research provides valuable insights for policymakers and economic planners seeking to optimize Nigeria’s tax revenue structure and ensure long-term economic resilience.