Moderating Effect of Digitalisation on the Relationship Between Petroleum Revenue and Budget Performance in Nigeria

Abstract

Motivated by the persistent fiscal discrepancies evident in Nigeria, the ongoing inadequacies in revenue collection, along with the volatility of oil prices, have resulted in chronic budget deficits, thereby jeopardizing Nigeria's long-term fiscal viability. This research seeks to elucidate the moderating influence of digitalisation on the relationship between petroleum revenue and budget performance in Nigeria, with annual data spanning from 1981 to 2024. The study employed quantitative longitudinal research design. Key variables included petroleum revenue as independent variable, with global oil prices and government expenditure growth as controls. The Autoregressive Distributed Lag (ARDL) model was employed to analyze both short-run and long-run dynamics after unit root tests (Augmented Dickey-Fuller and Philip-Perron) confirmed a mix of stationary variables. The results revealed that petroleum revenue has a significant negative effect on budget performance in both the short and long run, aligning with the "resource curse" theory. The interaction term with petroleum revenue was positive and statistically significant. This indicates that digitalisation effectively moderates the relationship, enhancing the efficiency and transparency of revenue collection and thereby bolstering budget performance. The consistently significant negative error correction terms across all models confirmed a long-run equilibrium relationship. Government expenditure growth also demonstrated a positive and significant influence on budgetary performance, highlighting the importance of prudent spending. Robustness tests revealed that both pre-digitalization (1981–2002) and post-digitalization (2003–2024) eras significantly and positively influenced Nigeria's short-run budget performance. The study concluded that digitalisation adoption in Nigeria significantly moderates the relationship between petroleum revenue and budget performance. The study recommends that the Nigerian government should increase the current 0.5% stabilization fund to mitigate the negative effects of oil price volatility and strengthen fiscal discipline by insulating the fund from political spending pressures. Moreover, it advocates for the full implementation of the Nigeria Tax Act 2025, which promotes the digitalisation of government revenue streams to improve collection efficiency and effectiveness by agencies and institutions of the federal government of Nigeria.