Abstract

The study examines the effect of oil revenue on income inequality in Nigeria using a time series data from 1990 to 2014. The Error Correction Model (ECM) was employed on the time series data in order to study the effect of oil revenue on income inequality in Nigeria. The study adopted a country-specific approach using oil revenue, Gini coefficient and macroeconomic data from 1990-2014. Data were collected from the Central Bank of Nigeria Annual Statistical Bulletin, Index Mundi, World Bank Indicators and relevant literatures.   From the empirical result, a negative and robust relationship was found to exist between inflation rate (INFL) and income inequality in Nigeria with t-statistic value of (-1.818855). A negative, but statistically insignificant relationship was also found to exist between oil revenue (OIL REV), government recurrent expenditure on social and community services (GREXP) and income inequality with t-statistic values of (-0.252134) and (-0.058335) respectively. While RealGDP had a positive statistically significant relationship with income inequality having a reported a t-statistic value of (2.198320). It was concluded that though oil revenue reduces income inequality, the high level corruption in the oil industry has made it non-realistic due to the continuous increase in the gap between the poor and the rich in the economy. Thus, it was recommended among others, that the government should put necessary measures in place in order to checkmate the high level of corruption in the oil industry and the nation at large.

KEYWORDS: Oil revenue, Income inequality, Gini coefficient, Error Correction Model.

JEL CLASSIFICATION: Q32, O15, D31, C32.