A Comparative Analysis of Declining Oil Revenue Implications on Oil Exporting Countries: An ARDL Bound Test Approach for Nigeria, Venezuela, and Norway

Abstract

One of the most dynamically transacted commodities across the globe is crude oil whose price is constantly changing. The magnitude of the effect in the oil price fluctuation differs across nations, depending on whether the country is oil-importer or oil-exporter.  Oil serves as a good source of revenue to oil exporting countries and also serves as a vital input to oil importing nations. However, this study entails a comparative analysis of declining oil revenue on three oil-exporting countries, Nigeria, Venezuela, and Norway.  Yearly timeseries data for 41 years were analyzed, using ARDL estimation technique.   Results reveal that government revenues of these oil-exporting countries have dropped substantially.  Contrary to expectation, decreasing oil price yields a positive and significant effect on Nigeria and Venezuela’s government expenditures, financed through seigniorage and borrowing as they are overwhelmingly dependent on oil exports while Norway is not affected by the resource curse syndrome. Norway is serving as a reference to best practice as they manage their natural resources effectively.  To close the revenue gaps, it is recommended that Nigeria and Venezuela adapt Norway’s fiscal rule, fix their refineries, restore security to attract foreign investors, diversify and effectively harness other natural resource.